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Plains All American Completes Deleveraging Plan, Updates Financial Policy, Increases Distributions, and Announces Series A & B Distributions

Plains All American Pipeline, L.P. (NYSE: PAA) and Plains GP Holdings (NYSE: PAGP) today announced achievement of Plains' August 2017 deleveraging plan, updates to its financial policy, an increase to its common unit and Class A share distributions, and declaration of Series A & B Preferred Units distributions.

Key elements of today's announcement include:

  • Successful achievement of Plains' August 2017 deleveraging plan and associated financial policy review;
  • Further improving PAA's credit profile by lowering its targeted long-term debt to Adjusted EBITDA leverage ratio (S&L normalized) by 0.5x to a range of 3.0 - 3.5x (3.25x midpoint) with the objective of achieving mid-triple B equivalent investment grade ratings over time;
  • Establishing long-term sustainable minimum annual distribution coverage level of 130% underpinned by predominantly fee-based cash flows;
  • Increasing PAA & PAGP's annualized distribution by $0.24 per common unit and per Class A share, respectively ($1.44 per common unit and per Class A share on an annualized basis), payable May 15, 2019 to holders of record on May 1, 2019, which equates to a 20% increase from the distributions paid in February 2019;
  • Adoption of an annual cycle for setting the common unit distribution level, consistent with the annual planning process; and
  • Intention to increase distributions in the future contingent on achieving and maintaining targeted leverage and coverage ratios and subject to the annual review process;
    • In the interim, expect +/- 5% annual common unit distribution increases over the next couple of years.

"We are pleased to announce the successful completion of our 2017 deleveraging plan and to provide several important updates regarding our financial policy, including our plans with respect to distributions," stated Willie Chiang, CEO of Plains All American. "These actions reflect a balanced long-term approach focused on further enhancing financial flexibility and making disciplined investments that increase distributable cash flow and value per unit, while sustainably increasing cash returned to equity holders over time. Consistent with those objectives, we intend to continue to focus on activities to enhance investment returns and reinforce capital discipline through asset optimization, joint ventures, potential divestitures and similar arrangements."

Al Swanson, Executive Vice President and Chief Financial Officer of Plains All American, added, "Concurrent with the completion of the 2017 deleveraging plan, we have completed a review of our financial policies and approach to capital allocation, targeted leverage and distribution management. Our financial policy review involved extensive analysis of a wide variety of considerations and potential scenarios, including an assessment of recent, current and anticipated financial market conditions for energy-related entities. In addition, we received feedback from investors and other stakeholders and analyzed a number of additional factors, including the potential tax implications for our equity holders and the mitigating impact of bonus depreciation that we intend to take for the next several years. Importantly, today's actions reflect our dedication to optimizing sustainable unitholder value while also preserving and enhancing our financial flexibility, further reducing leverage and improving Plains' credit profile, with an objective of achieving mid-triple B equivalent credit ratings over time."

Swanson added, "We are taking a long-term approach designed to enhance per unit value creation by capturing growth through execution of our current capital program and disciplined pursuit of additional strategic and capital-efficient projects and joint ventures that protect and enhance our existing asset network. Consistent with previous disclosures, we expect to fund the equity portion of our routine growth capital programs with cash flow in excess of distributions, which limits, if not eliminates, the need to issue common equity to fund this growth."

Swanson continued, "We have also established a long-term sustainable minimum annual distribution coverage level of at least 130%, underpinned predominantly by fee-based cash flows, but we expect our coverage will be higher than the minimum level for the next few years as we focus on improving our financial flexibility and credit ratings. Under the overarching construct of enhancing sustainable long-term value on a per unit basis, moving forward, we will consider our positioning, the market environment and the following four primary components of capital allocation: leverage reduction, disciplined capital investment, distribution growth, and opportunistic equity buybacks only if warranted by market conditions. In the near-to-medium term, we expect distributions and distribution growth to be our primary method of returning capital to investors."

With respect to the PAA common unit and PAGP Class A share distribution at the increased distribution level, this represents a quarterly cash distribution of $0.36 per common unit and per Class A share, respectively or $1.44 per common unit/Class A share on an annualized basis. Additionally, with respect to PAA's Series A Preferred Units, PAA announced a quarterly cash distribution of $0.525 per Series A Preferred Unit, or $2.10 on an annualized basis. For its Series B Preferred Units, PAA announced a semi-annual distribution of $30.625 per Series B Preferred Unit. All distributions (attributable to common units, Class A shares and Preferred Units) will be payable on May 15, 2019 to holders of record at the close of business on May 1, 2019.

Additionally, the PAGP cash distribution is expected to be a non-taxable return of capital to the extent of a Class A Shareholder's tax basis in each PAGP Class A Share and a reduction in the tax basis of that Class A Share. To the extent any cash distribution exceeds a Class A Shareholder's tax basis, it should be taxable as capital gains.

Plains All American Pipeline, L.P. is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids ("NGL"), and natural gas. PAA owns an extensive network of pipeline transportation, terminalling, storage, and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada. On average, PAA handles more than 5 million barrels per day of crude oil and NGL in its Transportation segment. PAA is headquartered in Houston, Texas. More information is available at

Plains GP Holdings is a publicly traded entity that owns an indirect, non-economic controlling general partner interest in PAA and an indirect limited partner interest in PAA, one of the largest energy infrastructure and logistics companies in North America. PAGP is headquartered in Houston, Texas.

This press release contains forward-looking statements, including statements about our plans, strategies and objectives for future results or outcomes. Such statements are based on management's current expectations and what we believe to be reasonable assumptions; however, we can give no assurance that future results or outcomes will be achieved. Various risks, uncertainties and other factors, some of which may be beyond our control, could cause actual results or outcomes to differ materially from results or outcomes anticipated in the forward-looking statements. These risks, uncertainties and other factors are disclosed in our filings with the Securities and Exchange Commission.

Roy Lamoreaux
VP - IR, Communications & GR
(866) 809-1291

Brett Magill
Director - Investor Relations
(866) 809-1291

Apr 04, 2019
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