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Plains All American announces actions to strengthen financial positioning

Published by , Editorial Assistant
World Pipelines,

Plains All American (Plains or the Partnership) has announced the following actions:

  • Reduced 2020/2021 capital programme by US$750 million, or 33% (reduced by US$1.35 billion, or 47% including elimination of assumed JV project financing).
  • Decreased PAA common unit / PAGP Class A share distributions payable in May by 50% (reduction of approximately US$525 million on annualised basis).
  • Completed an additional US$165 million asset sale (US$440 million closed or under definitive agreement year to date).
  • Continue to pursue capital and cost reductions throughout the organisation and supply chain, as well as additional asset sales.
  • “We are taking a number of actions in response to the current dynamic and uncertain market conditions to further strengthen our balance sheet and further enhance our liquidity and long-term financial flexibility,” stated Willie Chiang, Chairman and CEO of Plains All American. “These actions include significantly reducing and continuing to challenge our capital program, reducing our distribution, progressing asset sales, and reducing costs, while remaining focused on operating safely and responsibly.”

“We are committed to further strengthening our balance sheet, reducing leverage, and further enhancing our financial flexibility for the benefit of all of our stakeholders,” stated Al Swanson, Executive Vice President and CFO of Plains All American. “Importantly, we ended the first quarter with approximately US$2.5 billion of committed liquidity and no near-term needs to access either the debt or equity capital markets. We continue to actively monitor the current environment and intend to address forward guidance and related matters on our first-quarter earnings conference call in May.”

Total expansion capital for 2020/2021 is now targeted to be approximately US$1.55 billion, or US$750 million (33%) lower than the previously targeted US$2.3 billion capital programme, and US$1.35 billion (47%) lower when eliminating US$600 million of assumed JV project financing (net to Plains) for the Red Oak project, which has been deferred. The balance of the capital reductions relate to cancelations, cost savings and scope adjustments to other capital projects. First quarter 2020 expansion capital expenditures are estimated to be approximately US$350 million. The Partnership will continue to work closely with customers and industry partners to optimise, defer and potentially further reduce the capital program, subject to producer activity levels on Plains system.

Acknowledging the uncertain duration of current and anticipated industry challenges and to further reinforce PAA’s commitment to maintaining a solid capital structure and strong liquidity, Plains’ Board of Directors has approved a distribution of US$0.18 per PAA common unit and PAGP Class A share for the first quarter of 2020. These distributions represent a 50% reduction relative to distributions paid in February 2020 and equate to an annualized distribution rate of US$0.72 per PAA common unit and corresponding PAGP Class A share versus its previous annualized level of US$1.44 per PAA common unit / PAGP Class A share.

With respect to PAA’s Series A Preferred Units, PAA announced a quarterly cash distribution of US$0.525 per Series A Preferred Unit, or US$2.10 on an annualised basis. For its Series B Preferred Units, PAA announced a semi-annual distribution of US$30.625 per Series B Preferred Unit. All distributions (attributable to common units, Class A shares and Preferred Units) will be payable on 15 May 2020 to holders of record at the close of business on 1 May 2020.

Regarding the asset sales program, the Partnership closed an incremental sale on 1 April, which generated proceeds of US$165 million and brings year-to-date proceeds to approximately US$245 million. An additional US$195 million asset sale remains under definitive agreement and is expected to close later in the year. Plains is continuing its efforts to advance additional asset sales opportunities.

The Partnership noted that 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.

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