Executive Summary / Key Takeaways

• Plains GP Holdings, L.P. (PAGP) is strategically transforming into a pure-play crude oil midstream entity, divesting its Canadian NGL business for approximately $3.75 billion to enhance financial flexibility and sharpen its focus on core crude oil operations.
• The company has aggressively expanded its integrated crude oil footprint through a series of bolt-on acquisitions in 2025, notably the $2.90 billion acquisition of the EPIC Pipeline, which is expected to drive significant synergistic growth.
• PAGP demonstrated strong financial performance, with net income for the nine months ended September 30, 2025, increasing to $1,279 million, supported by higher crude oil volumes and tariff escalations.
• A disciplined capital allocation strategy prioritizes returning capital to unitholders, evidenced by a 20% distribution increase, and plans to redeploy divestiture proceeds into accretive M&A, debt reduction, and opportunistic unit repurchases.
• Despite near-term market volatility and contract rate resets, management maintains a constructive long-term outlook for crude oil demand and Permian production, positioning PAGP for sustained growth and enhanced investor value.

Plains GP Holdings: Forging a Crude-Centric Future in North American Midstream

Plains GP Holdings, L.P. (PAGP), through its indirect investment in Plains All American Pipeline, L.P. (PAA), stands as a critical infrastructure provider in the North American midstream energy landscape. Formed in 2013, PAGP has evolved from a diversified crude oil and natural gas liquids (NGL) operator into a strategically streamlined entity, increasingly focused on its core crude oil business. This transformation is rooted in a history of adapting to market dynamics and overcoming significant challenges, such as the estimated $870 million in costs from the 2015 Line 901 incident, which underscored the importance of robust risk management and financial resilience. The company's "efficient growth" strategy, emphasizing disciplined capital investments and strategic acquisitions, has been a consistent theme, shaping its current competitive posture and future trajectory.

PAGP's competitive edge is built upon its extensive, integrated network of crude oil pipelines, terminalling, storage, and gathering assets across key North American basins, including the prolific Permian Basin, and at major market hubs in the United States and Canada. This infrastructure, coupled with deep logistics expertise, provides customers with flow assurance, reliability, quality control, and access to multiple markets. This operational prowess allows PAGP to differentiate itself from competitors by offering tailored crude oil services and maintaining substantial liquidity to keep its pipelines full without forcing shippers to a single destination. The company's ongoing implementation of a new Enterprise Resource Planning (ERP) system, substantially completed in the third quarter of 2025, further enhances this operational efficiency by improving system configurations, integrations, and reporting processes.

The broader industry landscape presents a constructive long-term outlook for crude oil. Management anticipates that global energy demand, driven by population and economic growth, will continue to rely heavily on hydrocarbons for decades. New OPEC+ supply is expected to be absorbed, reducing spare capacity and increasing reliance on North American onshore production. The Permian Basin, in particular, is projected to be a significant growth engine, with crude production expected to grow by 200,000 to 300,000 barrels per day from year-end 2024 to year-end 2025, reaching approximately 6.7 million barrels per day by the end of 2025. This growth is expected to lead to a constructive long-haul market, with volumes pushing towards full utilization of efficient operating capacity.

In this competitive environment, PAGP faces formidable rivals such as Enterprise Products Partners L.P. (EPD), Kinder Morgan, Inc. (KMI), and ONEOK, Inc. (OKE). While EPD and KMI boast larger scale and more diversified asset bases, potentially offering greater operational efficiency and market reach, PAGP's specialized focus on crude oil logistics provides a distinct advantage in its core segments. For instance, PAGP's ability to offer flexible destination options to Permian shippers, rather than forcing them to a specific location, enhances its customer appeal and differentiates it from some competitors. The company's strong geographic presence in key growth basins like the Permian and Western Canadian Sedimentary Basin also provides a defensive moat, allowing it to capitalize on regional opportunities and potentially execute projects faster than some larger, more diversified players.

Strategic Realignment and Operational Momentum

A pivotal strategic move for PAGP was the definitive agreement, announced in June 2025, to sell substantially all of its Canadian NGL Business to Keyera Corp. (KEY) for approximately CAD 5.15 billion, or USD 3.75 billion. This divestiture, expected to close in the first quarter of 2026, is a strategic shift aimed at focusing on core crude oil operations, reducing exposure to commodity price fluctuations and seasonality, and generating a more durable cash flow stream. While the Canadian NGL business is being divested, PAGP will retain its U.S. NGL assets and all crude oil assets in Canada, with the minor U.S. NGL assets likely to be monetized at a later date. The NGL segment has also seen operational improvements, with the 30,000 barrel per day fractionation bottleneck project at Fort Saskatchewan placed into service during the second quarter of 2025, supported by long-term customer commitments and enhancing the integrated NGL value chain.

PAGP has simultaneously pursued an aggressive bolt-on acquisition strategy throughout 2025, significantly expanding its crude oil footprint. Key acquisitions include:

• Ironwood Midstream Energy Partners II, LLC: Acquired on January 31, 2025, for approximately $481 million, this Eagle Ford gathering system extends and expands PAGP's integrated asset base.
• EMG Medallion 2 Holdings, LLC (Medallion Midstream): Acquired in January 2025 for $163 million, this Delaware Basin crude oil gathering and transportation business enhances the Permian JV's footprint.
• Cheyenne Pipeline LLC: The remaining 50% interest was acquired in February 2025 through a non-monetary transaction, consolidating ownership of this vital Rockies connection.
• Black Knight Midstream, LLC: Acquired in the second quarter of 2025 for $59 million, this Permian Basin crude oil gathering business further strengthens PAGP's presence in the region.
• BridgeTex Pipeline Company, LLC: An additional 20% interest was acquired in July 2025 for $180 million, increasing PAGP's total interest to 40% and allowing for enhanced optimization with ONEOK.
• EPIC Crude Holdings, LP (EPIC Pipeline): In a highly synergistic and strategic move, PAGP acquired a 100% equity interest in EPIC Crude Holdings through two transactions on October 31 and November 1, 2025, for an aggregate of approximately $2.90 billion, including $1.10 billion of assumed debt. This acquisition provides long-haul crude oil takeaway from the Permian and Eagle Ford basins to the Gulf Coast market at Corpus Christi, significantly bolstering PAGP's market position.

These acquisitions, particularly in the Permian Basin, are strategically aligned with the company's outlook for increased volumes and high utilization on its Corpus Christi-bound assets, the Basin pipeline, and the Wink to Webster pipeline. Producer efficiencies, such as longer laterals and larger multi-well pads, are driving more capital-efficient connections for PAGP, with nearly 40% of Permian connections now "behind pipe," leveraging existing facilities.

Financial Performance and Disciplined Capital Allocation

PAGP delivered solid financial results for the nine months ended September 30, 2025. Net income increased to $1,279 million, a significant rise from $953 million in the same period of 2024. Product sales revenues, while impacted by lower commodity prices, saw higher crude oil sales volumes. Services revenues for the nine months ended September 30, 2025, increased due to higher pipeline volumes, tariff escalations, and contributions from recent acquisitions. Depreciation and amortization expenses rose, largely driven by the company's acquisition activity. Interest expense also increased, primarily due to PAA's issuance of $1 billion in 5.95% senior notes in January 2025 and $1.25 billion in September 2025, partially offset by debt repayments.

Segment Adjusted EBITDA for the Crude Oil segment saw a positive trend, increasing for both the three and nine months ended September 30, 2025, compared to the prior year. This growth was fueled by higher tariff volumes, tariff escalations, and contributions from recent acquisitions, though partially offset by fewer market-based opportunities and the resetting of some Permian long-haul contract rates. Conversely, the NGL segment reported an Adjusted EBITDA loss, primarily due to overhead costs associated with continuing operations, such as information technology and shared services, which are not tied to the divested Canadian NGL business.

PAGP maintains a robust financial position, with a working capital surplus of $218 million and approximately $3.90 billion in available liquidity as of September 30, 2025. Net cash provided by operating activities from continuing operations was strong, reaching $1.83 billion for the first nine months of 2025.

The company has actively managed its debt profile, redeeming $1 billion of 4.65% senior notes in October 2025 using cash on hand and funding the EPIC acquisition with approximately $1.80 billion from its commercial paper program and credit facilities. This disciplined approach to capital management was recognized by Moody's, which upgraded PAGP to Baa2 with a stable outlook, achieving the company's target of a mid-BBB credit rating from all three major agencies.

The company's capital allocation framework is clear: generate significant free cash flow, maintain financial flexibility, and increase returns to unitholders. The approximately $3 billion in net proceeds from the Canadian NGL divestiture are earmarked for redeployment into disciplined bolt-on M&A, capital structure optimization (including potential Series A and B preferred unit repurchases), and opportunistic common unit repurchases. PAGP has already demonstrated this commitment by increasing its quarterly distribution by 20% in the first quarter of 2025. For 2025, total investment capital is projected to be approximately $600 million ($490 million net to PAGP's interest), including $110 million related to discontinued operations, while maintenance capital is expected to be approximately $230 million ($215 million net to PAGP's interest).

Risks and Competitive Dynamics

Despite its strategic strengths, PAGP faces inherent risks. Environmental liabilities remain a concern, as evidenced by the estimated $870 million in costs from the 2015 Line 901 incident and the $20 million estimated clean-up cost for the March 2025 L48 pipeline release. The company also faces ongoing legal challenges, such as the Louisiana coastal erosion lawsuit, which it intends to vigorously defend. Furthermore, a $225 million insurance reimbursement claim related to a prior class action settlement was largely denied, leading to a write-off of the receivable.

Market volatility, driven by factors like commodity price fluctuations, trade tariffs, and OPEC dissension, poses a continuous challenge. Management has indicated that a sustained WTI price environment of $60 to $65 per barrel would likely place both 2025 EBITDA guidance and Permian growth outlook in the lower half of their respective ranges. While PAGP's NGL segment is largely hedged for 2025, crude oil operations remain exposed to these market shifts.

In the competitive landscape, PAGP's focused crude oil strategy, while providing niche expertise, means it operates at a different scale than more diversified midstream giants like EPD and KMI. These larger players often benefit from broader asset bases and more diversified revenue streams, which can lead to greater resilience during market downturns and potentially higher growth rates in emerging energy segments. For instance, EPD's extensive integrated operations across multiple commodity types may offer a broader competitive moat. However, PAGP's strength lies in its deep understanding and operational excellence within the crude oil value chain, offering superior flow assurance and market access for its customers. The company's ability to execute synergistic bolt-on acquisitions, like EPIC Pipeline, allows it to grow its footprint strategically and enhance its competitive standing without overextending its capital.

Conclusion

Plains GP Holdings, L.P. is undergoing a significant and well-executed strategic transformation, shedding its Canadian NGL assets to become a more focused and financially flexible crude oil midstream powerhouse. This strategic pivot, coupled with a series of accretive bolt-on acquisitions, particularly the transformative EPIC Pipeline deal, positions PAGP to capitalize on the constructive long-term outlook for North American crude oil production, especially in the Permian Basin. The company's disciplined capital allocation, commitment to returning cash to unitholders through increasing distributions, and strong balance sheet underscore a compelling investment thesis. While market volatility and environmental risks persist, PAGP's operational excellence, integrated asset base, and strategic positioning provide a robust foundation for sustained growth and enhanced shareholder value in the evolving energy landscape.