Plains GP Holdings, L.P. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the supplied text does not provide standalone fourth-quarter results. PAGP has no operating assets of its own: its cash flow depends on distributions from Plains AAP, which receives distributions from Plains All American Pipeline, L.P. (PAA). Consolidated financial statements include PAA and its subsidiaries, so consolidated totals are not the same as income attributable to PAGP shareholders.
Financial performance and position
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Total revenue | $48.712 billion | $57.342 billion | Down 15%; chiefly lower commodity prices and derivative mark-to-market effects |
| Services revenue | $1.738 billion | $1.394 billion | Up 25%, reflecting higher pipeline volumes, tariff escalations and acquisitions |
| Net income, consolidated | $1.425 billion | $1.163 billion | Up 23% |
| Net income attributable to PAGP | $198 million | $168 million | Up 18%; diluted earnings per Class A share were $1.01 versus $0.86 |
| Operating cash flow | $2.722 billion | $2.404 billion | Up $318 million |
| Adjusted EBITDA | $3.167 billion | $2.875 billion | Up 10%; non-GAAP measure |
| Adjusted EBITDA attributable to PAA | $2.711 billion | $2.510 billion | Up 8%; non-GAAP measure |
| Debt, consolidated PAA group | $7.751 billion | $8.446 billion | Down $695 million; includes $433 million commercial paper borrowings |
| Liquidity | $2.643 billion | — | Includes $447 million cash and available credit capacity, subject to covenant compliance |
Consolidated net margin, calculated as net income divided by revenue, was approximately 2.9% in 2023 versus 2.0% in 2022. Revenue less purchases and related costs was $4.181 billion, compared with $4.166 billion in 2022; this is not a stated GAAP gross-margin measure. Cash and cash equivalents were $453 million at year-end, while working capital was negative $89 million.
Segment results and material year-over-year changes
- Crude Oil: Segment Adjusted EBITDA rose 9% to $2.163 billion. Average crude-oil pipeline tariff volumes increased 12% to 8.460 million barrels per day. Higher volumes, tariff escalations and acquisitions more than offset fewer market-based merchant opportunities.
- NGL: Segment Adjusted EBITDA was nearly flat at $522 million. Average fractionation volumes fell 16% to 115,000 barrels per day, and NGL pipeline tariff volumes fell 6% to 180,000 barrels per day. Favorable basis differentials and market opportunities largely offset lower straddle production, higher costs and the Keyera facility sale.
- Product sales revenue and purchases declined with lower commodity prices; average WTI was $78 per barrel in 2023 versus $94 in 2022. Field operating costs rose 8% to $1.425 billion, G&A rose 8% to $356 million, and depreciation and amortization rose 9% to $1.051 billion.
- Reported earnings included a $140 million gain on the Keyera Fort Saskatchewan facility sale and a $58 million gain from settlement of the Series A preferred distribution-rate reset derivative. The 2022 comparison included a $330 million noncash California crude-asset impairment and a $370 million Cactus II remeasurement gain. These items affect comparability.
Cash, debt, distributions and investment
- Operating cash flow was $2.722 billion; investing activities used $702 million and financing activities used $1.971 billion. 2023 financing included repayment of $1.1 billion of senior notes and $433 million net commercial-paper borrowings.
- Year-end debt was $7.751 billion, mostly fixed-rate senior notes. A $750 million note matures in 2024; management said it had the ability and intent to refinance it long term. PAA was in compliance with debt covenants at year-end.
- PAA reported more than $2.6 billion of liquidity, despite a working-capital deficit. The revolving facility and hedged-inventory facility mature principally in 2028 and 2026, respectively; availability depends on covenant compliance.
- PAGP paid $1.07 per Class A share during 2023, up from $0.8325 in 2022. The $0.3175 quarterly distribution for the quarter ended December 31, 2023 was paid in February 2024, equivalent to $1.27 annualized at that rate. PAGP’s distributions depend on PAA and AAP cash distributions and are not guaranteed or cumulative.
- 2023 investment, maintenance and acquisition capital expenditures were $399 million, $231 million and $431 million, respectively. For 2024, management projected investment capital of approximately $465 million ($375 million net to its interest) and maintenance capital of approximately $250 million ($230 million net). It expects to fund these primarily with retained cash flow.
Outlook, risks and contingencies
- Management expects multi-year positive free cash flow, supported by its integrated asset network and expected Permian Basin production growth, and prioritizes distributions, disciplined investments and investment-grade credit strength. The filing does not provide a specific 2024 earnings or revenue forecast.
- Key business risks include commodity-market structure and volatility, reduced production or demand, pipeline capacity overbuild and tariff pressure, customer concentration, counterparty credit, interest and currency rates, severe weather, cyber incidents, and regulatory or climate-related changes. ExxonMobil accounted for 26% of 2023 revenue; the majority related to crude-oil merchant activity.
- Line 901 incident: Estimated total costs are approximately $750 million. At year-end, PAGP recorded a $94 million gross liability and a $225 million long-term insurance receivable; insurers have denied some claims, and arbitration and litigation remain. A disputed or delayed recovery, or higher ultimate costs, could materially affect results.
- Canadian tax reassessments: Authorities assessed approximately $165 million, including interest and penalties, primarily concerning historical transfer pricing. PAGP had remitted approximately $87 million, recorded as an asset, disputes the reassessments and has not accrued a liability, believing its position is more likely than not to be sustained.
- Other environmental reserves, excluding Line 901, were $56 million. The filing notes that actual remediation, litigation and regulatory costs could exceed estimates or insurance coverage. A separate lawsuit related to the 2021 sale of a natural-gas storage facility is described as not expected to have a material adverse effect.
- Management and the auditor concluded that internal control over financial reporting was effective as of year-end; the auditor issued unqualified opinions on the financial statements and controls.
Important facts for investors to verify
- Confirm PAA’s ability to sustain distributions to AAP and PAGP, including the impact of preferred-unit distributions, capital needs and any reserves.
- Track the $750 million 2024 debt maturity, refinancing progress, leverage and continued covenant compliance.
- Follow outcomes and timing of Line 901 insurance recovery and remaining claims, and whether the $225 million receivable remains recoverable.
- Monitor 2024 capital spending against plan and whether project costs, permits or construction timing change.
- Assess the effects of customer concentration, commodity-market changes and pipeline competition on volumes, merchant margins and contract renewals.
- Review the Canadian tax dispute and the recoverability of the $87 million remitted asset; separately consider the company’s deferred-tax assumptions and applicable tax treatment.