Plains All American (PAA) plans to focus on bolt-on M&A following a divestiture in Canada that will provide the midstream company about $3.75 billion in cash, executives said Aug. 8 during a second-quarter earnings call.
As part of its earnings report, the company also announced the purchase of a 20% stake in the BridgeTex Pipeline joint venture (JV) for $100 million, increasing PAA’s ownership in the pipeline to 40%. ONEOK owns the other 60% of the line.
The move illustrates PAA’s continued focus on the crude segment. In June, Plains announced it would sell its Canadian NGL assets to Keyera for $3.75 billion. The companies expect to close the sale by the start of 2026.
The sale made Plains into a crude oil pure play, which CEO Willie Chiang said was the result of simply following market economics. The company’s asset value was about 80% crude and 20% NGL. The sale gives the company more options.
“Going to a pure play was not the objective,” Chiang said. “Our objective is to create value for the unit holders however we possibly can.”
The CEO said he did not know exactly how proceeds of roughly $3 billion will be spent, but Plains has identified several bolt-on targets, capital structure improvements and stock unit buybacks.
“We’re going to parlay on that and try to build even a stronger system, anchored on the platform of our constructive view of oil markets going forward,” he said.
The company sees room for additional bolt-ons in both areas like the Permian and the Midcontinent, where Plains’ integrated network could create synergies. Globally, Plains executives said they have not seen the demand slowdown some had anticipated and reported refiners are seeing strong diesel demand.
“The last six months has felt a lot better than the prior six months from a demand perspective,” said Jeremy Goebel, PAA chief commercial officer. “We haven’t seen the slowdown in demand most were expecting.”
The BridgeTex is a 440,000-bbl/d crude line connecting the Permian Basin to Southeast Texas. East Daley Analytics reported Aug. 8 that the JV had cut its committed tariff by 27%, from $3.15/bbl to $2.30/bbl, while increasing its uncommitted tariff to $5.47/bbl.
The move “marks a clear pivot towards securing longer-term volumes,” the East Daley report said. BridgeTex has been one of the last crude lines out of the Permian to fill. East Daley forecast the line would reach capacity in 2026.
Plains forecast a positive long-term view of the global oil market, even amid short-term volatility. Management expects fundamentals to improve in the coming years, citing population growth, economic expansion and a tightening supply-demand balance as OPEC+ spare capacity shrinks.
For the second quarter, adjusted EBITDA attributable to Plains came in at $672 million, with full-year guidance unchanged at $2.8 billion to $2.95 billion. Both the EBITDA and the Permian crude growth forecast of 200,000 bbl/d to 300,000 bbl/d are expected to track toward the lower end of their ranges, executives said, referring to continued volatility on the global market.