Plains All American Announces Bolt-on Acquisitions, Capital Structure Optimization & Distribution Increase
Rhea-AI Summary
Plains All American Pipeline (PAA) has announced three strategic bolt-on acquisitions totaling approximately $670 million, along with significant capital structure optimization initiatives. The company is acquiring Ironwood Midstream Energy for $475 million, expanding its Eagle Ford Basin presence. Through its joint venture, it acquired Medallion Midstream's Delaware Basin crude oil gathering business for $160 million ($105 million net to PAA), and purchased the remaining 50% stake in Midway Pipeline for $90 million.
Additionally, PAA will purchase about 12.7 million units (18%) of its outstanding Series A Preferred Units at $26.25 per unit, totaling approximately $330 million. The company also announced a 20% increase in its quarterly distribution from $0.3175 to $0.38 per unit. Post-transactions, PAA's leverage ratio is expected to remain at or below their target range of 3.25x to 3.75x.
Positive
- Three strategic acquisitions expanding presence in key basins for $670 million
- 20% increase in quarterly distribution to $0.38 per unit
- Leverage ratio expected to remain at or below target range (3.25x-3.75x)
- Immediate value creation through earnings and distributable cash flow accretion
Negative
- Significant cash outlay of $1 billion combined for acquisitions and preferred units buyback
News Market Reaction
On the day this news was published, PAA gained 6.24%, reflecting a notable positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
HOUSTON, Jan. 07, 2025 (GLOBE NEWSWIRE) -- Plains All American Pipeline, L.P. (Nasdaq: PAA) and Plains GP Holdings (Nasdaq: PAGP) (collectively, “Plains”) announced today three bolt-on acquisitions for an aggregate cash consideration of approximately
Bolt-on Acquisitions
- Plains signed a definitive agreement to acquire Ironwood Midstream Energy, which owns an Eagle Ford Basin gathering system, from EnCap Flatrock Midstream for approximately
$475 million . The transaction is expected to close in the first quarter of 2025 following satisfaction of customary closing conditions. - Effective January 1, 2025, a subsidiary of Plains Permian Basin joint venture, Plains Oryx Permian Basin LLC, acquired Medallion Midstream’s Delaware Basin crude oil gathering business from The Energy & Minerals Group for approximately
$160 million ($105 million net to PAA’s interest). - On December 23, 2024, a subsidiary of Plains acquired the remaining
50% interest in Midway Pipeline LLC from a subsidiary of CVR Energy for approximately$90 million . - These transactions further enhance Plains’ crude oil footprint in the Permian, Eagle Ford and Mid-Con at returns consistent with our bolt-on framework and provide incremental return of capital opportunities for our unitholders.
Capital Structure Optimization
- Plains has also agreed to purchase approximately 12.7 million units, or
18% , of its outstanding Series A Preferred Units at “par” ($26.25) for a purchase price of approximately$330 million (plus accrued and unpaid distributions) from EnCap Flatrock Midstream. This transaction is expected to close in late January 2025. - After giving effect to all of these transactions, Plains' leverage ratio is expected to be at or below the low-end of our target range of 3.25x to 3.75x, continuing to provide significant balance sheet optionality and flexibility.
Return of Capital Update
- The Plains Board of Directors has approved an increase in the quarterly distribution payable in February 2025 for both PAA common units and PAGP Class A shares from
$0.31 75 per unit to$0.38 per unit. On an annualized basis, the distribution represents a$0.25 per unit, or20% , increase from the distribution paid in November 2024.
“The bolt-on acquisitions announced today are an excellent strategic fit for Plains and allow us to progress our efficient growth strategy by adding high-quality assets adjacent to our existing integrated footprint,” said Willie Chiang, Chairman and CEO of Plains. “Importantly, these transactions create immediate value by delivering sustainable accretion to earnings, distributable cash flow and accelerating return of capital to unitholders. Our capital allocation framework remains intact, and we remain committed to financial flexibility, capital discipline, generating meaningful free cash flow and increasing return of capital to our unitholders as demonstrated today.”
About Plains
PAA is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil and natural gas liquids (NGL). PAA owns an extensive network of pipeline gathering and transportation systems, in addition to terminalling, storage, processing, fractionation and other infrastructure assets serving key producing basins, transportation corridors and major market hubs and export outlets in the United States and Canada. On average, PAA handles approximately eight million barrels per day of crude oil and NGL.
PAGP 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.
PAA and PAGP are headquartered in Houston, Texas. More information is available at www.plains.com.
Investor Relations Contacts:
Blake Fernandez
Michael Gladstein
plainsIR@plains.com
(866) 809-1291
FAQ
What are the three acquisitions announced by Plains All American (PAA) in January 2025?
How much is PAA's new quarterly distribution after the January 2025 increase?
What is the value of PAA's Series A Preferred Units buyback announced in 2025?
What is Plains All American's target leverage ratio range after the 2025 acquisitions?
How much is PAA paying for Ironwood Midstream Energy acquisition in 2025?
