Plains All American Pipeline, L.P. Common Units representing Limited Partner Interests 2026 Q2 Earnings Call

Good morning. Welcome to Plains All American second quarter 2026 earnings call. Today's slide presentation is posted on the investor relations website under the News and Events section at ir.plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide two. An overview of today's call is provided on slide three. A condensed consolidated balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chiang, Chairman, CEO, and President, Al Swanson, Executive Vice President and CFO, and other members of the management team. With that, I'll turn the call over to Willie.

Thank you, Blake. Good morning, everyone. Thank you for joining us. This morning, we reported second quarter adjusted EBITDA attributable to Plains of $738 million, which puts us on track to deliver our full-year EBITDA guidance of $2.88 billion ±$75 million for 2026. Al will cover more details on our results in his portion of the call. The conflict in the Middle East and supply disruptions from the Strait of Hormuz illustrate the importance of reliable, secure, and responsibly produced energy. We believe this increases the value of existing infrastructure. We are well-positioned to help play a critical role in meeting global energy demand well into the future. While the macro environment has been volatile, we are successfully executing on our three key initiatives for the year.

In May, we closed on the sale of our Canadian NGL business, bringing our leverage down to 3.3 times. Additionally, we have captured our targeted Cactus III synergies, which will enhance our connectivity to the Corpus Christi market in oil exports longer term. Finally, we expect to realize $50 million of efficiencies across the organization by year-end 2026, along with an additional $50 million by the end of 2027. Strong producer activity and customer demand, coupled with our premier crude oil footprint, are creating new organic investment opportunities. As we outlined in our June press release, in detail on slide five, we increased our growth capital spending for 2026 from $350 million to a range of $400 million-$450 million. These are predominantly quick-hit projects that will contribute to the 2027 EBITDA and will generate a greater return above our hurdle rate.

This includes a further build-out of our Permian gathering system to service additional dedicated acreage in the Midland and Delaware basins. The acreage is backed by several high-quality producers and spans multiple counties. This brings our POP JV total dedicated Permian acreage to approximately 5.1 million acres. Additionally, we are expanding our Canadian gathering systems. The additional capacity and connectivity will support strategic projects in the Clearwater and the Duvernay formations and are backed by producer commitments. Finally, we have sanctioned a very capital-efficient expansion of the Cactus III pipeline, adding an additional 75,000 barrels a day capacity. This brings the total capacity of the line to 725,000 barrels a day. The expansion will come online by the end of this month and will support increased demand for export barrels out of the Corpus Christi market.

We continue to evaluate additional investment opportunities, both organic and inorganic, that strengthen our portfolio and complement our existing asset base. With regard to Permian production, we now expect approximately 100,000-200,000 barrels a day of growth in 2026 versus 2025 on an exit-to-exit basis. Upside from our previous forecast of relatively flat production is mainly due to natural gas egress coming online earlier than expected. Importantly, the ramp-up in Permian oil production will create meaningful momentum into 2027 while having minimal impact to EBITDA this year. Our capital allocation framework and efficient growth strategy remain intact. We have a commitment to capital discipline to optimize our asset base and maintaining a very flexible balance sheet while returning significant cash to shareholders. With that, let me turn the call over to Al to cover our quarterly performance and other financial matters.

Thanks, Willie. Slides six and seven contain adjusted EBITDA walks that provide additional details on our performance. For the second quarter, we reported crude oil segment adjusted EBITDA of $690 million, representing a significant increase from the first quarter level. This was driven by a combination of Cactus III synergies, efficiencies, market-based opportunities, and the absence of headwinds from the first quarter. I would note that second quarter results include approximately $14 million of one-off environmental remediation expenses. Moving to the NGL segment, we reported adjusted EBITDA of $40 million, which reflects the mid-May closing date on the sale of the business. We are contemplating removing NGL segment EBITDA from our reporting in the third quarter and instead reporting adjusted EBITDA with one segment. A summary of 2026 guidance and key assumptions are on slide eight.

As Willie outlined, we raised growth capital to a range of $400 million-$450 million and increased our premium production forecast to 100,000-200,000 barrels a day exit-to-exit. Maintenance capital was decreased to $175 million, largely due to the timing of the NGL sale. Regarding our pipeline loss allowance revenue, we are approximately 70% hedged for the balance of the year at an average WTI price around $62. We plan to disclose our 2027 hedge position in February in conjunction with our full year outlook. As illustrated on slide nine, we expect to generate approximately $1.75 billion of free cash flow in 2026 and return significant capital to unit holders while maintaining financial flexibility. Our pro forma leverage ratio at the end of the second quarter was 3.3 times, reflecting approximately $2.9 billion of debt reduction driven by the NGL divestiture.

With that, I will turn the call back to Willie.

Thanks, Al. Slide 10 highlights the 7% compound annual growth of our crude business over the past few years. Our efficient growth strategy and the sale of the NGL business position us well to execute through a range of market environments, generating a more durable cash flow and creating long-term value. We continue to build momentum into 2027 with increasing Permian production and a strong balance sheet with leverage at the low end of our target range. Our capital allocation framework priorities remain the same. One, return cash to unit holders through our targeted $0.15 per unit annual increases. Two, execute on accretive bolt-on acquisitions and organic CapEx. Three, maintain a strong balance sheet with financial flexibility. We have already identified and expect to capture an additional $50 million of streamlining costs in 2027. We are well-positioned to capture potential tailwinds from the volatile oil macro environment.

With that, I'll turn the call over to Blake to lead us into Q&A.

Thanks, Willie. As we enter the Q&A session, please limit yourself to two questions. This will allow us to address questions from as many participants as possible in our available time this morning. With that, operator, please open the call for questions.