Plains All American announces $670 million in acquisitions, 18% Series A Preferred Units purchase, and 20% distribution increase.
Quiver AI Summary
Plains All American Pipeline and Plains GP Holdings announced three acquisitions totaling approximately $670 million, including the acquisition of Ironwood Midstream Energy's gathering system in the Eagle Ford Basin for $475 million. They also purchased Medallion Midstream's Delaware Basin crude oil gathering business for around $160 million and acquired the remaining 50% interest in Midway Pipeline LLC for $90 million. Additionally, Plains will buy back 18% of its outstanding Series A Preferred Units for about $330 million and raise its annual distribution rate by 20%. These transactions are expected to enhance Plains' operations in key regions, improve financial flexibility, and deliver immediate value to unitholders. The company remains committed to its capital allocation strategy while aiming to provide significant returns to shareholders.
Potential Positives
- Plains announced three bolt-on acquisitions, enhancing its crude oil footprint in key markets and supporting its growth strategy.
- The company has committed to optimizing its capital structure by purchasing 18% of its outstanding Series A Preferred Units, improving financial flexibility.
- A 20% increase in the quarterly distribution rate demonstrates a strong return of capital commitment to unitholders.
- Following the transactions, Plains' leverage ratio is expected to be at the low end of the target range, indicating strong financial health and balance sheet strength.
Potential Negatives
- Seeking significant cash expenditure of approximately $670 million for acquisitions may raise concerns about the company’s financial health and liquidity.
- Acquiring 18% of its own Series A Preferred Units may be viewed as a signal that the company is unable to attract external investors at favorable terms.
FAQ
What acquisitions did Plains All American announce?
Plains announced three bolt-on acquisitions totaling approximately $670 million, including Ironwood Midstream Energy and Medallion Midstream's operations.
What is the impact of these acquisitions on Plains' distribution rate?
The acquisitions led to a 20% increase in Plains' annualized distribution rate, raising it from $0.3175 to $0.38 per unit.
How much did Plains pay for its Series A Preferred Units?
Plains agreed to purchase 12.7 million Series A Preferred Units at $26.25 per unit for approximately $330 million.
When are the transactions expected to close?
The closing of the Ironwood acquisition is expected in Q1 2025, while the Preferred Units purchase will close in late January 2025.
What is the significance of these transactions for unitholders?
The transactions are expected to create immediate value by enhancing earnings and accelerating returns of capital to unitholders.
Disclaimer: This is an AI-generated summary of a press release distributed by GlobeNewswire. The model used to summarize this release may make mistakes. See the full release here.
$PAA Hedge Fund Activity
We have seen 155 institutional investors add shares of $PAA stock to their portfolio, and 95 decrease their positions in their most recent quarter.
Here are some of the largest recent moves:
- TORTOISE CAPITAL ADVISORS, L.L.C. removed 5,607,612 shares (-29.7%) from their portfolio in Q3 2024
- JPMORGAN CHASE & CO added 2,677,951 shares (+58.9%) to their portfolio in Q3 2024
- CHICKASAW CAPITAL MANAGEMENT LLC removed 1,748,148 shares (-42.2%) from their portfolio in Q4 2024
- MIRAE ASSET GLOBAL ETFS HOLDINGS LTD. added 1,325,656 shares (+10.4%) to their portfolio in Q3 2024
- BANK OF AMERICA CORP /DE/ removed 1,255,099 shares (-26.2%) from their portfolio in Q3 2024
- CITIGROUP INC added 1,125,386 shares (+48.9%) to their portfolio in Q3 2024
- KAYNE ANDERSON CAPITAL ADVISORS LP removed 1,003,436 shares (-11.7%) from their portfolio in Q3 2024
To track hedge funds' stock portfolios, check out Quiver Quantitative's institutional holdings dashboard.
Full Release
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 $670 million net to Plains, the purchase of approximately 18% of its outstanding PAA Series A Preferred Units and a 20% increase in its annualized distribution rate.
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 $0.3175 per unit to $0.38 per unit. On an annualized basis, the distribution represents a $0.25 per unit, or 20%, 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
This article was originally published on Quiver News, read the full story.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
