Plains All American Pipeline (PAA) made several bolt-on acquisitions totaling $670MM to expand its crude oil gathering footprint in the Permian and Eagle Ford basins. The deals with Ironwood Midstream Energy Partners, Medallion Midstream, and CVR Energy create potential operational synergies and position PAA to benefit from oil production growth.
PAA announced the deals January 7 amid an active period for midstream mergers. PAA will acquire Ironwood’s Eagle Ford Basin gathering system for $475MM, Medallion’s Delaware Basin crude oil gathering business for $160MM (~$105MM net to PAA), and the remaining 50% interest in Midway Pipeline from CVR Energy for $90MM.
East Daley Analytics tracks these crude assets in the PAA Financial Blueprint. We estimate the Midway Pipeline transaction will boost the asset’s FY25 EBITDA contribution to ~$22MM compared to EBITDA of ~$10.5MM for the latest 12 months. Starting in 1Q25, the Medallion Delaware asset will contribute another ~$14MM to FY25 EBITDA and gather ~55 Mb/d as a part of the Plains Oryx Permian Basin JV (see figure).
Along with the acquisitions, PAA rolled out several shareholder-friendly initiatives. The company will repurchase $330MM of 12.7MM Series A preferred units from EnCap Flatrock Midstream to reduce its leverage and improve financial flexibility. PAA also raised its quarterly distribution by 20%.
As modeled in the Financial Blueprint, PAA issued $1B of 5.950% senior unsecured notes due 2035 to fund the latest acquisitions and repurchase shares, maintaining a 3.2x leverage ratio in 1Q25. PAA will also use proceeds to repay amounts outstanding under its credit facilities and commercial paper program.
Looking ahead, the latest deals better position PAA to capitalize on robust activity in the Permian, ensuring sustainable growth and enhanced profitability. Management noted the acquisitions and financial steps create immediate value by increasing earnings and accelerating capital returns.
East Daley released our 4Q24 Earnings Preview for PAA earlier this week. Clients can also use interactive tools in Energy Data Studio to look deeper into the company. The second figure from the “Peer Comparison Tool” profiles PAA by commodity, asset type, and regional market.
Reach out to East Daley for more information on the Plains outlook. – Gage Dwan Tickers: PAA.
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