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What changed in PLAINS GP HOLDINGS LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PLAINS GP HOLDINGS LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+271 added−285 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in PLAINS GP HOLDINGS LP's 2024 10-K

271 paragraphs added · 285 removed · 231 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

106 edited+16 added−24 removed294 unchanged
Biggest changeRisks Related to PAA’s Business PAA’s business, results of operations, financial condition, cash flows and unit price can be adversely affected by many factors including but not limited to: • the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of PAA’s pipelines and facilities, which can be negatively impacted by a variety of factors outside of its control; • competition in PAA’s industry, including recontracting and other risks associated with the general capacity overbuild of midstream energy infrastructure in some of the areas where PAA operates; • changes in supply and demand for the products PAA handles and the services it provides, which can be caused by a variety of factors outside of its control; • natural disasters, catastrophes, terrorist attacks (including eco-terrorist attacks), process safety failures, equipment failures or other events, including pipeline or facility accidents and cyber or other attacks on PAA’s electronic and computer systems, could interrupt its operations, hinder PAA’s ability to fulfil its contractual obligations and/or result in severe personal injury, property damage and environmental damage; • cybersecurity attacks, data breaches and other disruptions affecting PAA or its service providers could materially and adversely affect its business, operations, reputation and financial results; • risks arising from climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy; • societal and political pressures from various groups, including opposition to the development or operation of PAA’s pipelines and facilities; • increased concern by financial stakeholders with respect to PAA’s governance structure and the perceived social and environmental cost of PAA’s industry; • the overall forward market for crude oil and NGL, and certain market structures, the absence of pricing volatility and other market factors; • an inability to fully implement or realize expected returns or other anticipated benefits associated with acquisitions, joint venture and joint ownership arrangements, divestitures and other projects; • entering into new businesses in connection with PAA’s strategy to participate in emerging energy opportunities; 38 Table of Contents Index to Financial Statements • pandemics, epidemics or other public health events; • loss of PAA’s investment grade credit rating or a significant reduction in the ability of PAA to receive open credit; • the credit risk of PAA’s customers and other counterparties it transacts with in the ordinary course of business activities; • tightened capital markets or other factors that increase PAA’s cost of capital or otherwise limit its access to capital; • the insufficiency of, or non-compliance with, PAA’s risk policies; • PAA’s insurance coverage may not fully cover its losses and it may in the future encounter increased costs related to, and lack of availability of, insurance; • PAA’s current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in interest rates and currency exchange rates; • difficulties recruiting and retaining PAA’s workforce; • an impairment of long-term assets; • significant under-utilization of certain assets due to fixed costs incurred to obtain the right to use such assets; • the cost to repair and maintain PAA’s assets; • PAA does not own all of the land on which its pipelines and facilities are located, which could result in disruptions to its operations; • failure to obtain materials or commodities in the quantity and the quality PAA needs, and at commercially acceptable prices, whether due to supply disruptions, inflation, tariffs, quotas or other factors; and • the pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin.
Biggest changeRisks Related to PAA’s Business PAA’s business, results of operations, financial condition, cash flows and unit price can be adversely affected by many factors including but not limited to: • the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of PAA’s pipelines and facilities, which can be negatively impacted by a variety of factors outside of its control; • competition in PAA’s industry, including recontracting and other risks associated with the general capacity overbuild of midstream energy infrastructure in some of the areas where PAA operates; • changes in supply and demand for the products PAA handles and the services it provides, which can be caused by a variety of factors outside of its control; • natural disasters, catastrophes, terrorist attacks (including eco-terrorist attacks), process safety failures, equipment failures or other events, including pipeline or facility accidents; • information or operations technology failures, including cybersecurity attacks, data breaches and other disruptions affecting PAA or its service providers; • risks arising from climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy; • societal and political pressures from various groups, including opposition to the development or operation of PAA’s pipelines and facilities; • increased concern by financial stakeholders with respect to PAA’s governance structure and the perceived social and environmental cost of PAA’s industry; • the overall forward market for crude oil and NGL, and certain market structures, the absence of pricing volatility and other market factors; • an inability to fully implement or realize expected returns or other anticipated benefits associated with acquisitions/divestitures, joint venture and joint ownership arrangements, and other projects; • entering into new businesses in connection with PAA’s strategy to participate in emerging energy opportunities; • loss of PAA’s investment grade credit rating or a significant reduction in the ability of PAA to receive open credit; 39 Table of Contents Index to Financial Statements • the credit risk of PAA’s customers and other counterparties it transacts with in the ordinary course of business activities; • tightened capital markets or other factors that increase PAA’s cost of capital or otherwise limit its access to capital; • the insufficiency of, or non-compliance with, PAA’s risk policies; • PAA’s insurance coverage may not fully cover its losses and it may in the future encounter increased costs related to, and lack of availability of, insurance; • trade tariffs, duties, quotas, inflation, supply disruptions or other factors affecting the commodities and materials PAA uses in its business; • pandemics, epidemics or other public health events; • PAA’s current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in interest rates and currency exchange rates; • difficulties recruiting and retaining PAA’s workforce; • an impairment of long-term assets; • significant under-utilization of certain assets due to fixed costs incurred to obtain the right to use such assets; • the cost to repair and maintain PAA’s assets; • PAA does not own all of the land on which its pipelines and facilities are located, which could result in disruptions to its operations; and • the pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin.
Risks Related to Conflicts of Interest Our existing organizational structure and the current and future relationships among us, PAA, our respective general partners, the Legacy Owners and affiliated entities present the potential for conflicts of interest.
Risks Related to Conflicts of Interest Our existing organizational structure and the current and future relationships among us, PAA, our respective general partners, the Legacy Owners and affiliated entities present the potential for conflicts of interest.
PAA’s business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events. PAA’s business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
PAA’s business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
A downgrade by such agencies to a level below investment grade could increase its borrowing costs, reduce its borrowing capacity and cause its counterparties to reduce the amount of open credit it receives from them. This could negatively impact PAA’s ability to capitalize on market opportunities.
A downgrade by such agencies to a level below investment grade could increase PAA’s borrowing costs, reduce its borrowing capacity and cause its counterparties to reduce the amount of open credit it receives from them. This could negatively impact PAA’s ability to capitalize on market opportunities.
Based on PAA’s current operations, and current Treasury regulations, PAA believes that it is treated as a partnership rather than a corporation for such purposes; however, a change in PAA’s business could cause it to be treated as a corporation for U.S. federal income tax purposes.
Based on PAA’s current operations, and current U.S. Treasury regulations, PAA believes that it is treated as a partnership rather than a corporation for such purposes; however, a change in PAA’s business could cause it to be treated as a corporation for U.S. federal income tax purposes.
Except for Class A shares issued in connection with the exercise of an Exchange Right, which will result in the cancellation of an equivalent number of Class B shares and therefore have no effect on the total number of outstanding shares, the issuance of additional Class A shares or our other equity securities of equal or senior rank, or the issuance by AAP of additional securities, will have the following effects: • each shareholder’s proportionate ownership interest in us may decrease; • the amount of cash available for distribution on each Class A share may decrease; • the relative voting strength of each previously outstanding Class A share may be diminished; • the ratio of taxable income to distributions may increase; and • the market price of the Class A shares may decline. 41 Table of Contents Index to Financial Statements If PAA’s unitholders remove PAA GP as PAA”s general partner, AAP may be required to sell or exchange its indirect general partner interest and we may lose our ability to manage and control PAA.
Except for Class A shares issued in connection with the exercise of an Exchange Right, which will result in the cancellation of an equivalent number of Class B shares and therefore have no effect on the total number of outstanding shares, the issuance of additional Class A shares or our other equity securities of equal or senior rank, or the issuance by AAP of additional securities, will have the following effects: • each shareholder’s proportionate ownership interest in us may decrease; • the amount of cash available for distribution on each Class A share may decrease; • the relative voting strength of each previously outstanding Class A share may be diminished; • the ratio of taxable income to distributions may increase; and • the market price of the Class A shares may decline. 42 Table of Contents Index to Financial Statements If PAA’s unitholders remove PAA GP as PAA”s general partner, AAP may be required to sell or exchange its indirect general partner interest and we may lose our ability to manage and control PAA.
Significant increases in interest rates above current levels could adversely affect PAA’s results of operations, cash flows and financial position due to, among other things: • PAA’s exposure to market risk due to the short-term nature of its commercial paper borrowings and the floating interest rates on its credit facilities; • Any potential refinancing of PAA’s indebtedness at rates higher than historical amounts; • Increasing interest costs associated with the storage of hedged crude oil and NGL inventory in PAA’s merchant activities; and • Distributions payable on PAA’s Series B preferred units, which accumulate for each distribution period at a percentage of the liquidation preference equal to the applicable three-month Secured Overnight Financing Rate (SOFR), plus a credit spread adjustment of 0.2621%, plus 4.11% per annum.
Significant increases in interest rates above current levels could adversely affect PAA’s results of operations, cash flows and financial position due to, among other things: • PAA’s exposure to market risk due to the short-term nature of its commercial paper borrowings and the floating interest rates on its credit facilities; • Any potential refinancing of PAA’s indebtedness at rates higher than historical amounts; • Increasing interest costs associated with the storage of hedged crude oil and NGL inventory in PAA’s merchant activities; and • Distributions payable on PAA’s Series B preferred units, which accumulate for each distribution period at a percentage of the liquidation preference equal to the applicable three-month Secured Overnight Financing Rate (SOFR), plus a credit spread adjustment of 0.26161%, plus 4.11% per annum.
Although PAA qualifies for the end-user exception from margin requirements for swaps entered into to hedge commercial risks, if any of PAA’s swaps do not qualify for the commercial end-user exception, or if PAA is otherwise required to post additional cash margin or collateral it could reduce PAA’s ability to execute hedges necessary to reduce commodity price exposures and protect cash flows.
Although PAA qualifies for the end-user exception from margin requirements for swaps entered into to hedge commercial risks, if any of its swaps do not qualify for the commercial end-user exception, or if PAA is otherwise required to post additional cash margin or collateral, it could reduce PAA’s ability to execute hedges necessary to reduce commodity price exposures and protect cash flows.
In addition, implementation of the Dodd-Frank Act and related rules and regulations could reduce the overall liquidity and depth of the markets for financial and other derivatives PAA utilizes in connection with its business, which could expose PAA to additional risks or limit the opportunities PAA is able to capture by limiting the extent to which PAA is able to execute its hedging strategies.
In addition, implementation of the Dodd- Frank Act and related rules and regulations could reduce the overall liquidity and depth of the markets for financial and other derivatives PAA utilizes in connection with its business, which could expose PAA to additional risks or limit the opportunities it is able to capture by limiting the extent to which PAA is able to execute its hedging strategies.
Although PAA has credit risk management policies and procedures that are designed to mitigate and limit its exposure in this area, there can be no assurance that PAA has adequately assessed and managed the creditworthiness of its existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on PAA’s cash flow and its ability to pay or increase its cash distributions to its partners. 53 Table of Contents Index to Financial Statements PAA has a number of minimum volume commitment contracts that support its pipelines.
Although PAA has credit risk management policies and procedures that are designed to mitigate and limit its exposure in this area, there can be no assurance that PAA has adequately assessed and managed the creditworthiness of its existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on PAA’s cash flow and its ability to pay or increase its cash distributions to its partners. 54 Table of Contents Index to Financial Statements PAA has a number of minimum volume commitment contracts that support its pipelines.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could, in turn, have an adverse impact on PAA’s business. 50 Table of Contents Index to Financial Statements Activists concerned about the potential effects of climate change have directed their attention towards sources of funding for hydrocarbon energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in energy-related activities.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could, in turn, have an adverse impact on PAA’s business. 51 Table of Contents Index to Financial Statements Activists concerned about the potential effects of climate change have directed their attention towards sources of funding for hydrocarbon energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in energy-related activities.
Additionally, the treatment of PAA as a corporation would increase the portion of our distributions treated as taxable dividends; and • our current tax treatment may change, which could affect the value of our Class A shares or reduce our cash available for distribution, and any decrease in our Class A share price could adversely affect our amount of cash available for distribution. 39 Table of Contents Index to Financial Statements Risks Inherent in an Investment in Us Our cash flow will be entirely dependent upon the ability of PAA to make cash distributions to AAP, and the ability of AAP to make cash distributions to us.
Additionally, the treatment of PAA as a corporation would increase the portion of our distributions treated as taxable dividends; and • our current tax treatment may change, which could affect the value of our Class A shares or reduce our cash available for distribution, and any decrease in our Class A share price could adversely affect our amount of cash available for distribution. 40 Table of Contents Index to Financial Statements Risks Inherent in an Investment in Us Our cash flow will be entirely dependent upon the ability of PAA to make cash distributions to AAP, and the ability of AAP to make cash distributions to us.
Also, except with respect to some of PAA’s recently constructed long haul pipeline assets, third-party shippers generally do not have long-term contractual commitments to ship crude oil on PAA’s pipelines.
Also, except with respect to some of PAA’s more recently constructed long haul pipeline assets, third-party shippers generally do not have long-term contractual commitments to ship crude oil on PAA’s pipelines.
The principal elements of competition are rates, processing fees, geographic proximity to the natural gas or NGL mix, available processing and fractionation capacity, transportation alternatives and their associated costs, and access to end-user markets. 47 Table of Contents Index to Financial Statements Changes in supply and demand for the products PAA handles, which can be caused by a variety of factors outside of its control, can negatively affect its operating results.
The principal elements of competition are rates, processing fees, geographic proximity to the natural gas or NGL mix, available processing and fractionation capacity, transportation alternatives and their associated costs, and access to end-user markets. 48 Table of Contents Index to Financial Statements Changes in supply and demand for the products PAA handles, which can be caused by a variety of factors outside of its control, can negatively affect its operating results.
As a result, the price at which our Class A shares will trade may be lower because of the absence or reduction of a takeover premium in the trading price. 42 Table of Contents Index to Financial Statements If PAA’s general partner, which is owned by AAP, is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of PAA, its value, and, therefore, the value of our Class A shares, could decline.
As a result, the price at which our Class A shares will trade may be lower because of the absence or reduction of a takeover premium in the trading price. 43 Table of Contents Index to Financial Statements If PAA’s general partner, which is owned by AAP, is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of PAA, its value, and, therefore, the value of our Class A shares, could decline.
Terrorists may target PAA’s physical facilities and hackers may attack its electronic and computer systems. 48 Table of Contents Index to Financial Statements If one or more of PAA’s pipelines or other facilities, including electronic and computer systems, or any facilities or businesses that deliver products, supplies or services to PAA or that it relies on in order to operate its business, are damaged by severe weather or any other disaster, accident, catastrophe, terrorist attack or event, its operations could be significantly interrupted.
Terrorists may target PAA’s physical facilities and hackers may attack its electronic and computer systems. 49 Table of Contents Index to Financial Statements If one or more of PAA’s pipelines or other facilities, including electronic and computer systems, or any facilities or businesses that deliver products, supplies or services to PAA or that it relies on in order to operate its business, are damaged by severe weather or any other disaster, accident, catastrophe, terrorist attack or event, its operations could be significantly interrupted.
A decision by a shipper to substantially reduce or cease to ship volumes of crude oil on PAA’s pipelines could cause a significant decline in its revenues. 46 Table of Contents Index to Financial Statements To maintain the volumes of crude oil PAA purchases in connection with its operations, PAA must continue to contract for new supplies of crude oil to offset volumes lost because of reduced drilling activity by producers, natural declines in crude oil production from depleting wells or volumes lost to competitors.
A decision by a shipper to substantially reduce or cease to ship volumes of crude oil on PAA’s pipelines could cause a significant decline in its revenues. 47 Table of Contents Index to Financial Statements To maintain the volumes of crude oil PAA purchases in connection with its operations, PAA must continue to contract for new supplies of crude oil to offset volumes lost because of reduced drilling activity by producers, natural declines in crude oil production from depleting wells or volumes lost to competitors.
If PAA were to incur a significant liability for which it was not fully insured, or if PAA incurred costs in excess of reserves established for uninsured or self-insured risks, it could have a material adverse effect on PAA’s financial position, results of operations and cash flows. 49 Table of Contents Index to Financial Statements PAA’s and its customers’ operations are subject to various risks arising out of the threat of climate change.
If PAA were to incur a significant liability for which it was not fully insured, or if PAA incurred costs in excess of reserves established for uninsured or self-insured risks, it could have a material adverse effect on PAA’s financial position, results of operations and cash flows. 50 Table of Contents Index to Financial Statements PAA’s and its customers’ operations are subject to various risks arising out of the threat of climate change.
For example, the Legacy Owners may have different tax positions from us which could influence their decisions regarding whether and when to cause us to dispose of assets. 45 Table of Contents Index to Financial Statements Furthermore, conflicts of interest could arise in the future between us, on the one hand, and the Legacy Owners, on the other hand, concerning among other things, potential competitive business activities or business opportunities.
For example, the Legacy Owners may have different tax positions from us which could influence their decisions regarding whether and when to cause us to dispose of assets. 46 Table of Contents Index to Financial Statements Furthermore, conflicts of interest could arise in the future between us, on the one hand, and the Legacy Owners, on the other hand, concerning among other things, potential competitive business activities or business opportunities.
The resolution of these conflicts may not always be in our best interest or that of our shareholders. 44 Table of Contents Index to Financial Statements Our partnership agreement defines our general partner’s duties to us and contains provisions that reduce the remedies available to our shareholders for actions that might otherwise be challenged as breaches of fiduciary or other duties under state law.
The resolution of these conflicts may not always be in our best interest or that of our shareholders. 45 Table of Contents Index to Financial Statements Our partnership agreement defines our general partner’s duties to us and contains provisions that reduce the remedies available to our shareholders for actions that might otherwise be challenged as breaches of fiduciary or other duties under state law.
As of December 31, 2023, PAA had over $2.6 billion of liquidity available, including cash and cash equivalents and available borrowing capacity under its senior unsecured revolving credit facility and its senior secured hedged inventory facility, subject to continued covenant compliance. Lower Adjusted EBITDA could increase PAA’s leverage ratios and effectively reduce its ability to incur additional indebtedness.
As of December 31, 2024, PAA had over $2.6 billion of liquidity available, including cash and cash equivalents and available borrowing capacity under its senior unsecured revolving credit facility and its senior secured hedged inventory facility, subject to continued covenant compliance. Lower Adjusted EBITDA could increase PAA’s leverage ratios and effectively reduce its ability to incur additional indebtedness.
Consequently, if distributions on our Class A shares are not paid with respect to any fiscal quarter, our Class A shareholders will not be entitled to receive that quarter’s payments in the future. 40 Table of Contents Index to Financial Statements The amount of cash that we and PAA distribute each quarter may limit our ability to grow.
Consequently, if distributions on our Class A shares are not paid with respect to any fiscal quarter, our Class A shareholders will not be entitled to receive that quarter’s payments in the future. 41 Table of Contents Index to Financial Statements The amount of cash that we and PAA distribute each quarter may limit our ability to grow.
Current law may change, causing PAA to be treated as a corporation for U.S. federal income tax purposes or otherwise subjecting PAA to additional entity-level taxation. In addition, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation.
Current law may change, causing PAA to be treated as a corporation for U.S. federal income tax purposes or otherwise subjecting PAA to additional entity-level taxation. In addition, several states impose and others have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation.
The effects of a public health event depend on a wide variety of factors that are outside of PAA’s control, including the clinical severity and transmissibility of the virus or pathogen; the development, deployment, adoption and effectiveness of treatments and vaccines; the capacity of healthcare systems and public health infrastructure; and the response of public health authorities, governments and individuals in areas impacted by such event.
The effects of a public health event depend on a wide variety of factors that are outside of our control, including the clinical severity and transmissibility of the virus or pathogen; the development, deployment, adoption and effectiveness of treatments and vaccines; the capacity of healthcare systems and public health infrastructure; and the response of public health authorities, governments and individuals in areas impacted by such event.
We may also issue additional Class A shares or convertible securities in subsequent public or private offerings. 43 Table of Contents Index to Financial Statements We cannot predict the size of future issuances of our Class A shares or securities convertible into Class A shares or the effect, if any, that future issuances and sales of our Class A shares will have on the market price of our Class A shares.
We may also issue additional Class A shares or convertible securities in subsequent public or private offerings. 44 Table of Contents Index to Financial Statements We cannot predict the size of future issuances of our Class A shares or securities convertible into Class A shares or the effect, if any, that future issuances and sales of our Class A shares will have on the market price of our Class A shares.
In an effort to maintain a balanced position, specifically authorized personnel can purchase or sell crude oil, refined products and NGL, up to predefined limits and authorizations. Although this activity is monitored independently by PAA’s risk management function, it exposes PAA to commodity price risks within these limits.
In an effort to maintain a balanced position, specifically authorized personnel can purchase or sell crude oil and NGL, up to predefined limits and authorizations. Although this activity is monitored independently by PAA’s risk management function, it exposes PAA to commodity price risks within these limits.
In the past, the results of such activities have varied significantly based on market conditions and these activities may continue to experience highly variable results as a result of future changes to the markets for crude oil and NGL. 51 Table of Contents Index to Financial Statements Joint ventures, joint ownership arrangements and other projects pose unique challenges and PAA may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.
In the past, the results of such activities have varied significantly based on market conditions and these activities may continue to experience highly variable results as a result of future changes to the markets for crude oil and NGL. 52 Table of Contents Index to Financial Statements Joint ventures, joint ownership arrangements and other capital projects pose unique challenges and PAA may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.
Such events may cause widespread economic disruption and result in material reductions in demand for crude oil, NGL and other petroleum products, which in turn may result in significant declines in the volume of crude oil and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of many of PAA’s assets.
Such events may cause widespread economic disruption and result in material reductions in demand for crude oil, NGL and other petroleum products, which in turn may result in significant declines in the volume of crude oil and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of many of our assets.
Generally accepted accounting principles in the United States (“GAAP”) requires that a valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. We believe that the deferred tax asset we recorded through 2023 will be realized and that a valuation allowance is not required.
Generally accepted accounting principles in the United States (“GAAP”) requires that a valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. We believe that the deferred tax asset we recorded through 2024 will be realized and that a valuation allowance is not required.
The amount of PAA’s current or future indebtedness could have significant effects on its operations, including, among other things: • a significant portion of PAA’s cash flow will be dedicated to the payment of principal and interest on its indebtedness and may not be available for other purposes, including the payment of distributions on its units and capital expenditures; • credit rating agencies may view PAA’s debt level negatively; • covenants contained in PAA’s existing debt arrangements will require it to continue to meet financial tests that may adversely affect its flexibility to plan for and react to changes in its business; • PAA’s ability to obtain additional financing for working capital, capital expenditures, acquisitions and general partnership purposes may be limited; • PAA may be at a competitive disadvantage relative to similar companies that have less debt; and • PAA may be more vulnerable to adverse economic and industry conditions as a result of its significant debt level.
The amount of PAA’s current or future indebtedness could have significant effects on its operations, including, among other things: • a significant portion of PAA’s cash flow will be dedicated to the payment of principal and interest on its indebtedness and may not be available for other purposes, including the payment of distributions on its units and capital expenditures; • credit rating agencies may view PAA’s debt level negatively; • covenants contained in PAA’s existing debt arrangements will require it to continue to meet financial tests that may adversely affect its flexibility to plan for and react to changes in its business; • PAA’s ability to obtain additional financing for working capital, capital expenditures, acquisitions and general partnership purposes may be limited; 57 Table of Contents Index to Financial Statements • PAA may be at a competitive disadvantage relative to similar companies that have less debt; and • PAA may be more vulnerable to adverse economic and industry conditions as a result of its significant debt level.
In the United States, the Endangered Species Act (“ESA”) and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities that have the potential to adversely affect that species’ habitat.
In the United States, the ESA and comparable state laws were established to protect endangered and threatened species. Under the ESA, if a species is listed as threatened or endangered, restrictions may be imposed on activities that have the potential to adversely affect that species’ habitat.
In addition, although PAA believes that it currently maintains adequate insurance coverage, insurance will not cover many types of interruptions or events that might occur and will not cover all risks associated with its operations.
In addition, although PAA believes that it currently maintains adequate insurance coverage, insurance will not cover many types of interruptions or losses that might occur and will not cover all risks associated with its operations.
In addition, in connection with its divestitures, PAA may agree to retain responsibility for certain liabilities that relate to PAA’s period of ownership, which could adversely impact its future financial performance.
In addition, in connection with our divestitures, PAA may agree to retain responsibility for certain liabilities that relate to its period of ownership, which could adversely impact its future financial performance.
To the extent possible under these rules, PAA’s general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if PAA is eligible, issue a revised information statement to each unitholder and former unitholder with respect to an audited and adjusted return.
To the extent possible, PAA’s general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if PAA is eligible, issue a revised information statement to each unitholder and former unitholder with respect to an audited and adjusted return.
A valuation allowance on our deferred tax asset could reduce our earnings. As of December 31, 2023, we had a gross deferred tax asset of approximately $1.3 billion.
A valuation allowance on our deferred tax asset could reduce our earnings. As of December 31, 2024, we had a gross deferred tax asset of approximately $1.3 billion.
The tax treatment of PAA depends on its status as a partnership for U.S. federal income tax purposes, as well as it not being subject to a material amount of additional entity-level taxation by individual states.
The tax treatment of PAA depends on its status as a partnership for U.S. federal income tax purposes, as well as it not being subject to a material amount of additional entity-level taxation by individual states or foreign jurisdictions.
Many of these projects involve numerous regulatory, environmental, commercial, economic, weather-related, political and legal uncertainties that are beyond its control, including the following: • PAA may be unable to realize its forecasted commercial, operational or administrative synergies in connection with its joint ventures and joint ownership arrangements, including the Plains Oryx Permian Basin LLC joint venture; • Joint ventures and other joint ownership arrangements may demand substantial internal resources and may divert resources and attention from other areas of PAA’s business; • PAA may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes; • Despite the fact that PAA will expend significant amounts of capital during the construction phase of growth or expansion projects, revenues associated with these organic growth projects will not materialize until the projects have been completed and placed into commercial service, and the amount of revenue generated from these projects could be significantly lower than anticipated for a variety of reasons; • As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed, may be obtained with conditions that materially alter the expected return associated with the underlying projects or may be granted and then subsequently withdrawn; • PAA may face opposition to its planned projects from environmental groups, landowners, local groups and other advocates, including lawsuits or other actions designed to disrupt or delay PAA’s planned projects; • PAA may not be able to obtain, or PAA may be significantly delayed in obtaining, all of the rights of way or other real property interests it needs to complete such projects, or the costs PAA incurs in order to obtain such rights of way or other interests may be greater than PAA anticipated; • Due to unavailability or costs of materials, supplies, power, labor or equipment, including increased costs associated with any import duties or requirements to source certain supplies or materials from U.S. suppliers or manufacturers, the cost of completing these projects could turn out to be significantly higher than PAA budgeted and the time it takes to complete construction of these projects and place them into commercial service could be significantly longer than planned; and • The completion or success of PAA’s projects may depend on the completion or success of third-party facilities over which PAA has no control.
Thees projects can involve the expansion, modification, divestiture or combination of existing assets or the construction of new midstream energy infrastructure assets and involve numerous regulatory, environmental, commercial, economic, weather-related, political and legal uncertainties that are beyond its control, including the following: • PAA may be unable to realize its forecasted commercial, operational or administrative synergies in connection with its joint ventures and joint ownership arrangements, including the Permian JV; • Joint ventures and other joint ownership arrangements may demand substantial internal resources and may divert resources and attention from other areas of PAA’s business; • PAA may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes; • Despite the fact that PAA will expend significant amounts of capital during the construction phase of growth or expansion projects, revenues associated with these organic growth projects will not materialize until the projects have been completed and placed into commercial service, and the amount of revenue generated from these projects could be significantly lower than anticipated for a variety of reasons; • As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed, may be obtained with conditions that materially alter the expected return associated with the underlying projects or may be granted and then subsequently withdrawn; • PAA may face opposition to its planned projects from environmental groups, landowners, local groups and other advocates, including lawsuits or other actions designed to disrupt or delay PAA’s planned projects; • PAA may not be able to obtain, or PAA may be significantly delayed in obtaining, all of the rights of way or other real property interests it needs to complete such projects, or the costs PAA incurs in order to obtain such rights of way or other interests may be greater than PAA anticipated; • Due to unavailability or costs of materials, supplies, power, labor or equipment, including increased costs associated with any import duties or requirements to source certain supplies or materials from U.S. suppliers or manufacturers, the cost of completing these projects could turn out to be significantly higher than PAA budgeted and the time it takes to complete construction of these projects and place them into commercial service could be significantly longer than planned; and • The completion or success of PAA’s projects may depend on the completion or success of third-party facilities over which PAA has no control.
If the IRS were to treat PAA as a corporation for U.S. federal income tax purposes or if PAA becomes subject to additional amounts of entity-level taxation for state or foreign tax purposes, it would reduce the amount of cash available for distribution to us and increase the portion of our distributions treated as taxable dividends.
If the IRS were to treat PAA as a corporation for U.S. federal income tax purposes or if PAA becomes subject to a material amount of additional entity-level or other form of taxation for state or foreign tax purposes, it would reduce the amount of cash available for distribution to us and increase the portion of our distributions treated as taxable dividends.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” 56 Table of Contents Index to Financial Statements PAA’s ability to access capital markets to raise capital on favorable terms will be affected by its debt level, its operating and financial performance, the amount of its current maturities and debt maturing in the next several years, and by prevailing market conditions.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” PAA’s ability to access capital markets to raise capital on favorable terms will be affected by its debt level, its operating and financial performance, the amount of its current maturities and debt maturing in the next several years, and by prevailing market conditions.
Accordingly, the value of our indirect investment in PAA, as well as the anticipated after-tax economic benefit of an investment in our Class A shares, depends largely on PAA being treated as a partnership for U.S. federal income tax purposes, which requires that 90% or more of PAA’s gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Internal Revenue Code of 1986, as amended (the “Code”).
Accordingly, the value of our indirect investment in PAA, as well as the anticipated after-tax economic benefit of an investment in our Class A shares, depends largely on PAA being treated as a partnership for U.S. federal income tax purposes, which requires that 90% or more of PAA’s gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Code.
The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory and policy initiatives that impose more stringent standards for GHG emissions, restrict the areas in which the oil and gas industry may produce crude oil and natural gas or generate GHG emissions, increase scrutiny of environmental permitting or delay such permitting reviews, or require enhanced disclosure of such GHG emission and other climate-related information, could result in reduced demand for crude oil and natural gas, and thus PAA’s services, as well as increase its compliance costs.
The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory and policy initiatives that impose more stringent standards for GHG emissions, restrict the areas in which the oil and gas industry may produce crude oil and natural gas or generate GHG emissions, increase scrutiny of environmental permitting or delay such permitting reviews, or require enhanced disclosure of such GHG emission and other climate-related information, or promote and subsidize lower GHG emitting, alternative energy products, could result in reduced demand for crude oil and natural gas, and thus PAA’s services, as well as increase its compliance costs.
At December 31, 2023, the Legacy Owners owned approximately 16% of our outstanding Class A and Class B shares. Without the support of our Legacy Owners, such ownership level may make it more difficult for our Class A shareholders to obtain the requisite vote level required to remove our general partner.
At December 31, 2024, the Legacy Owners owned approximately 15% of our outstanding Class A and Class B shares. Without the support of our Legacy Owners, such ownership level may make it more difficult for our Class A shareholders to obtain the requisite vote level required to remove our general partner.
We did not have any earnings and profits in 2022 and we do not expect to have any earnings and profits for an extended period of time.
We did not have any earnings and profits in 2024 and we do not expect to have any earnings and profits for an extended period of time.
Any new laws, executive orders or regulations, or changes to or interpretations of existing laws or regulations, adverse to PAA could have a material adverse effect on its financial position, results of operations and cash flows. PAA has a history of making incremental additions to the miles of pipelines it owns, both through acquisitions and investment capital projects.
Any new laws, executive orders or regulations, or changes to or interpretations of existing laws or regulations, adverse to PAA could have a material adverse effect on its financial position, results of operations and cash flows. 60 Table of Contents Index to Financial Statements PAA has a history of making incremental additions to the miles of pipelines it owns, both through acquisitions and investment capital projects.
Any significant increase in these expenditures could adversely affect PAA’s results of operations, financial position or cash flows, as well as its ability to make cash distributions to its unitholders. PAA does not own all of the land on which its pipelines and facilities are located, which could result in disruptions to its operations.
Any significant increase in these expenditures could adversely affect PAA’s results of operations, financial position or cash flows, as well as its ability to make cash distributions to its unitholders. 59 Table of Contents Index to Financial Statements PAA does not own all of the land on which its pipelines and facilities are located, which could result in disruptions to its operations.
“Market for Registrant’s Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy.” The distributions AAP is entitled to receive may fluctuate, which may reduce cash distributions to our Class A shareholders. At December 31, 2023, we owned an approximate 84% limited partner interest in AAP, which owned approximately 232.7 million PAA common units.
“Market for Registrant’s Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy.” The distributions AAP is entitled to receive may fluctuate, which may reduce cash distributions to our Class A shareholders. At December 31, 2024, we owned an approximate 85% limited partner interest in AAP, which owned approximately 232.9 million PAA common units.
As a result of these uncertainties, the anticipated benefits associated with PAA’s joint ventures and joint ownership arrangements may not be achieved or could be delayed.
As a result of these uncertainties, the anticipated benefits associated with PAA’s joint ventures, joint ownership arrangements and other capital projects may not be achieved or could be delayed.
PAA’s operations involving the storage, treatment, processing, and transportation of liquid hydrocarbons, including crude oil, NGL and refined products, are subject to stringent federal, state, and local laws and regulations governing the discharge of materials into the environment.
PAA’s operations involving the storage, treatment, processing, and transportation of liquid hydrocarbons, including crude oil, NGL and natural gas, are subject to stringent federal, state, and local laws and regulations governing the discharge of materials into the environment.
The Legacy Owners may have interests that conflict with holders of our Class A shares. At December 31, 2023, the Legacy Owners owned approximately 16% of our outstanding Class A and Class B shares and approximately 16% of the AAP units. As a result, the Legacy Owners may have conflicting interests with holders of Class A shares.
The Legacy Owners may have interests that conflict with holders of our Class A shares. At December 31, 2024, the Legacy Owners owned approximately 15% of our outstanding Class A and Class B shares and approximately 15% of the AAP units. As a result, the Legacy Owners may have conflicting interests with holders of Class A shares.
For example, if the U.S. dollar appreciates against the Canadian dollar, the U.S. dollar value of PAA’s Canadian dollar denominated earnings is reduced for U.S. reporting purposes. PAA’s business requires the retention and recruitment of a skilled workforce, and difficulties retaining and recruiting its workforce could result in a failure to implement PAA’s business plans.
For example, if the U.S. dollar appreciates against the Canadian dollar, the U.S. dollar value of PAA’s Canadian dollar denominated earnings is reduced for U.S. reporting purposes. 58 Table of Contents Index to Financial Statements PAA’s business requires the retention and recruitment of a skilled workforce, and difficulties retaining and recruiting its workforce could result in a failure to implement PAA’s business plans.
The enactment and implementation of derivatives legislation could have an adverse impact on PAA’s ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with its business and increase the amount of working capital required to conduct these hedging activities .
Existing or future derivatives legislation and regulations could have an adverse impact on PAA’s ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with its business and increase the amount of working capital required to conduct these hedging activities.
Despite such efforts, PAA can provide no assurance that the FERC and other agencies that regulate its business will not issue future orders or declarations that increase its costs or otherwise adversely affect its operations. PAA’s Canadian pipelines are subject to regulation by the CER and by provincial authorities.
Despite such efforts, PAA can provide no assurance that the FERC and other agencies that regulate its business will not issue future orders or declarations that increase its costs or otherwise adversely affect its operations. 61 Table of Contents Index to Financial Statements PAA’s Canadian pipelines are subject to regulation by the CER and by provincial authorities.
If PAA is unable to (i) retain current employees; and/or (ii) recruit new employees of comparable knowledge and experience, PAA’s business could be negatively impacted. In addition, PAA could experience increased costs to retain current employees and recruit new employees. 57 Table of Contents Index to Financial Statements An impairment of long-term assets could reduce PAA’s earnings.
If PAA is unable to (i) retain current employees; and/or (ii) recruit new employees of comparable knowledge and experience, PAA’s business could be negatively impacted. In addition, PAA could experience increased costs to retain current employees and recruit new employees. An impairment of long-term assets could reduce PAA’s earnings.
As of December 31, 2023, the face value of PAA’s consolidated debt was approximately $7.8 billion (excluding unamortized discounts and debt issuance costs of approximately $41 million), substantially all of which was at fixed interest rates.
As of December 31, 2024, the face value of PAA’s consolidated debt was approximately $7.7 billion (excluding unamortized discounts and debt issuance costs of approximately $42 million), substantially all of which was at fixed interest rates.
The failure to comply with any such laws and regulations could result in the assessment of administrative, civil, and criminal penalties, the imposition of investigatory or remedial obligations or the incurrence of capital expenditures.
The failure to comply with any such laws and regulations could result in the assessment of administrative, civil, and criminal penalties, the imposition of investigatory or remedial obligations or the incurrence of capital expenditures, the costs of which may be substantial.
At December 31, 2023, through their ownership of Class B shares, the Legacy Owners held approximately 16% of the combined voting power of our Class A and Class B shares.
At December 31, 2024, through their ownership of Class B shares, the Legacy Owners held approximately 15% of the combined voting power of our Class A and Class B shares.
At December 31, 2023, we owned an approximate 84% limited partner interest in AAP, which directly owned a limited partner interest in PAA through its ownership of approximately 232.7 million PAA common units (approximately 30% of PAA’s Series A preferred units and common units combined).
At December 31, 2024, we owned an approximate 85% limited partner interest in AAP, which directly owned a limited partner interest in PAA through its ownership of approximately 232.9 million PAA common units (approximately 30% of PAA’s Series A preferred units and common units combined).
As of December 31, 2023, the face value of PAA’s consolidated debt outstanding was approximately $7.8 billion (excluding unamortized discounts and debt issuance costs of approximately $41 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $446 million of short-term borrowings.
As of December 31, 2024, the face value of PAA’s consolidated debt outstanding was approximately $7.7 billion (excluding unamortized discounts and debt issuance costs of approximately $42 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $408 million of short-term borrowings.
At December 31, 2023, PAA had approximately $15.8 billion of net property and equipment, $976 million of linefill, $2.8 billion of investments accounted for under the equity method of accounting and approximately $1.9 billion of net intangible assets capitalized on its balance sheet.
At December 31, 2024, PAA had approximately $15.4 billion of net property and equipment, $968 million of linefill, $2.8 billion of investments accounted for under the equity method of accounting and approximately $1.7 billion of net intangible assets capitalized on its balance sheet.
At December 31, 2023, the Legacy Owners owned approximately 16% of the Class A shares and Class B shares on a combined basis.
At December 31, 2024, the Legacy Owners owned approximately 15% of the Class A shares and Class B shares on a combined basis.
Imposition of any new or increased federal or state taxes on PAA may result in a decrease in the amount of distributions AAP receives from PAA and our resulting cash flows could be reduced substantially, which would adversely affect our ability to pay distributions to our shareholders.
Imposition of any similar taxes by individual states or additional federal or foreign taxes on PAA may result in a decrease in the amount of distributions AAP receives from PAA and our resulting cash flows could be reduced substantially, which would adversely affect our ability to pay distributions to our shareholders.
Deferred revenue associated with non-performance by shippers under minimum volume contracts could be significant and could adversely affect PAA’s profitability and earnings. In addition, in those cases in which PAA provides division order services for crude oil purchased at the wellhead, it may be responsible for distribution of proceeds to all parties.
Deferred revenue associated with movements by shippers of volumes that are less than minimum volume commitments could be significant and could adversely affect PAA’s profitability and earnings. In addition, in those cases in which PAA provides division order services for crude oil purchased at the wellhead, it may be responsible for distribution of proceeds to all parties.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established federal oversight and regulation of derivative markets and entities, such as PAA, that participate in those markets. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established federal oversight and regulation of derivative markets and entities, such as PAA, that participate in those markets. The CFTC has promulgated implementing regulations with respect to the Dodd-Frank Act.
PAA’s business also depends on having access to significant amounts of electricity and other commodities. If PAA is unable to obtain commodities sufficient to operate and maintain its assets, or only able to do so at commercially unreasonable prices, it could materially and adversely affect its business.
If PAA is unable to obtain commodities sufficient to operate and maintain its assets, or only able to do so at commercially unreasonable prices, it could materially and adversely affect PAA’s business.
The DOT regulations include requirements for the establishment of pipeline integrity management programs and for protection of HCAs where a pipeline leak or rupture could produce significant adverse consequences. Pipeline safety regulations are revised frequently.
PAA currently devotes substantial resources to comply with DOT-mandated pipeline integrity rules. The DOT regulations include requirements for the establishment of pipeline integrity management programs and for protection of HCAs where a pipeline leak or rupture could produce significant adverse consequences. Pipeline safety regulations are revised frequently.
Acquisitions also involve potential risks, including: • performance from the acquired businesses or assets that is below the forecasts PAA used in evaluating the acquisition; • a significant increase in PAA’s indebtedness and working capital requirements; • the inability to timely and effectively integrate the operations of recently acquired businesses or assets; • the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets for which PAA is either not fully insured or indemnified, including liabilities arising from the operation of the acquired businesses or assets prior to PAA’s acquisition; • risks associated with operating in lines of business that are distinct and separate from PAA’s historical operations; • customer or key employee loss from the acquired businesses; and • the diversion of management’s attention from other business concerns. 54 Table of Contents Index to Financial Statements Any of these factors could adversely affect PAA’s ability to achieve anticipated levels of cash flows or other benefits from its acquisitions, pay distributions to its partners or meet its debt service requirements.
Acquisitions also involve potential risks, including: • performance from the acquired businesses or assets that is below the forecasts PAA used in evaluating the acquisition; • a significant increase in PAA’s indebtedness and working capital requirements; • the inability to timely and effectively integrate the operations of recently acquired businesses or assets; • the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets for which PAA is either not fully insured or indemnified, including liabilities arising from the operation of the acquired businesses or assets prior to PAA’s acquisition; • risks associated with operating in lines of business that are distinct and separate from PAA’s historical operations; • customer or key employee loss from the acquired businesses; and • the diversion of management’s attention from other business concerns.
Members of Congress have proposed and considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including proposals that would eliminate PAA’s ability to qualify for partnership tax treatment. In addition, the Treasury Department has issued, and in the future may issue, regulations interpreting those laws that affect publicly traded partnerships.
Members of Congress have proposed and considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including proposals that would eliminate PAA’s ability to qualify for partnership tax treatment.
If a holder sells our Class A shares, the holder will recognize gain or loss equal to the difference between the amount realized and the holder’s tax basis in those Class A shares.
Taxable gain or loss on the sale of our Class A shares could be more or less than expected. If a holder sells our Class A shares, the holder will recognize gain or loss equal to the difference between the amount realized and the holder’s tax basis in those Class A shares.
The pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin. In certain areas where PAA operates (e.g., the Permian Basin), development of natural gas infrastructure is or may be required to increase accessible supply in order to meet projected demand.
In certain areas where PAA operates (e.g., the Permian Basin), development of natural gas infrastructure is or may be required to increase accessible supply in order to meet projected demand.
Additionally, to the extent that PAA enters into transportation contracts with pipelines that are subject to FERC regulation, it is subject to FERC requirements related to the use of such capacity.
PAA’s purchases and sales may also be subject to certain reporting and other requirements. Additionally, to the extent that PAA enters into transportation contracts with pipelines that are subject to FERC regulation, it is subject to FERC requirements related to the use of such capacity.
With regard to PAA’s physical purchases and sales of crude oil, natural gas or NGL and any related hedging activities that it undertakes, PAA is required to observe the market-related regulations enforced by these agencies, which hold substantial enforcement authority. PAA’s purchases and sales may also be subject to certain reporting and other requirements.
These agencies have imposed broad regulations prohibiting fraud and manipulation of such markets. With regard to PAA’s physical purchases and sales of crude oil, natural gas or NGL and any related hedging activities that it undertakes, PAA is required to observe the market-related regulations enforced by these agencies, which hold substantial enforcement authority.
If PAA experiences a shortage in the supply of these materials or is unable to source sufficient quantities of high quality materials at acceptable prices and in a timely manner, it could materially and adversely affect PAA’s ability to construct new infrastructure and maintain its existing assets.
If PAA experiences a shortage in the supply of these materials or is unable to source sufficient quantities of high quality materials at acceptable prices and in a timely manner, it could materially and adversely affect PAA’s ability to construct new infrastructure and maintain its existing assets. 56 Table of Contents Index to Financial Statements PAA’s business also depends on having access to significant amounts of electricity and other commodities.
Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to PAA’s income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from PAA.
If the IRS makes audit adjustments to PAA’s income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from PAA.
If funding is not available when needed, or is available only on unfavorable terms, PAA may be unable to implement its development plans, enhance its existing business, complete strategic projects and transactions, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on its cash flows and results of operations.
If funding is not available when needed, or is available only on unfavorable terms, PAA may be unable to implement its development plans, enhance its existing business, complete strategic projects and transactions, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on its cash flows and results of operations. 55 Table of Contents Index to Financial Statements PAA’s risk policies cannot eliminate all risks and the insufficiency of, or non-compliance with its risk policies could result in significant financial losses.
Any future legislative changes could negatively impact the value of our indirect investment in PAA. 65 Table of Contents Index to Financial Statements If the IRS makes audit adjustments to PAA’s income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from PAA, in which case PAA’s cash distribution to AAP and our cash available for distribution to our shareholders might be substantially reduced.
If the IRS makes audit adjustments to PAA’s income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from PAA, in which case PAA’s cash distribution to AAP and our cash available for distribution to our shareholders might be substantially reduced.
For a discussion of our Line 901 Incident insurance receivable, please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates— Line 901 Incident Insurance Receivable” and Note 18 to our Consolidated Financial Statements. The terms of PAA’s indebtedness may limit its ability to borrow additional funds or capitalize on business opportunities.
For a discussion of our Line 901 Incident insurance receivable, please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates— Line 901 Incident Insurance Receivable” and Note 18 to our Consolidated Financial Statements.
For more information, please see our regulatory disclosure entitled “Pipeline Safety/Integrity Management.” The adoption of new regulations requiring more comprehensive or stringent safety standards could require PAA to install new or modified safety controls, pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require PAA to incur increased operational costs that could be significant. 60 Table of Contents Index to Financial Statements Although PAA continues to focus on pipeline and facility integrity management as a primary operational emphasis, doing so requires substantial time and resources and cannot eliminate all risk of releases.
For more information, please see our regulatory disclosure entitled “Pipeline Safety/Integrity Management.” The adoption of new regulations requiring more comprehensive or stringent safety standards could require PAA to install new or modified safety controls, pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require PAA to incur increased operational costs that could be significant.
In March 2022, the SEC issued a proposed rule that would mandate extensive disclosure of climate-related risks, including financial impacts, physical and transition risks, climate-related governance and strategy, and GHG emissions, for all U.S.-listed public companies.
In March 2024, the SEC finalized a set of climate disclosure rules that would mandate extensive disclosure of climate-related risks, including financial impacts, physical and transition risks, climate-related governance and strategy, and GHG emissions, for all U.S.-listed public companies. Several states, including California, have passed or proposed bills requiring similar, or more extensive, climate disclosure rules.
PAA is also exposed to some risks that are not hedged, including risks on certain of its inventory, such as linefill, which must be maintained in order to transport crude oil on its pipelines.
Margin requirements due to spikes or crashes in commodity prices may require PAA to exit hedge strategies at inopportune times. PAA is also exposed to some risks that are not hedged, including risks on certain of its inventory, such as linefill, which must be maintained in order to transport crude oil on its pipelines.
PAA’s inability to maintain its targeted credit profile, including maintaining its credit ratings, could adversely affect PAA’s cost of capital as well as its ability to execute its strategy.
Any limitations on PAA’s access to capital or increase in the cost of that capital could significantly impair the implementation of its strategy. PAA’s inability to maintain its targeted credit profile, including maintaining its credit ratings, could adversely affect PAA’s cost of capital as well as its ability to execute its strategy.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+0 added−0 removed12 unchanged
Biggest changeOur cybersecurity leadership team also includes our Senior Director, Technology, Infrastructure & Cyber Defense and our Senior Director, Security & Strategy. The Board receives quarterly updates on material security incidents, detection, monitoring, security culture scores, and other key initiatives and notable events from our cybersecurity leadership team.
Biggest changeOur cybersecurity leadership team also includes our Director, Technology Risk and Cybersecurity, our Senior Director, Strategic Planning, our Senior Director, North American Solution Delivery and our Senior Director, Enterprise Technology. The Board receives quarterly updates on material security incidents (if applicable), detection, monitoring, security culture scores, and other key initiatives and notable events from our cybersecurity leadership team.
Cybersecurity Program Governance Our cybersecurity program is led by our Vice President of Information Security, North America, who reports directly to our CFO and oversees the dedicated team responsible for executing our cybersecurity strategy, including the primary assessment and management of cybersecurity risks.
Cybersecurity Program Governance Our cybersecurity program is led by our Vice President of Information Services, North America, who reports directly to our CFO and oversees the dedicated team responsible for executing our cybersecurity strategy, including the primary assessment and management of cybersecurity risks.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that $100 was invested in our Class A shares and each comparison index beginning on December 31, 2018 and that all distributions were reinvested on a quarterly basis. 69 Table of Contents Index to Financial Statements 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 PAGP $ 100.00 $ 100.28 $ 48.96 $ 63.11 $ 83.11 $ 114.79 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 AMNA $ 100.00 $ 124.04 $ 95.06 $ 131.58 $ 159.92 $ 182.34 This information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C under the Exchange Act, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Biggest changeThe graph assumes that $100 was invested in our Class A shares and each comparison index beginning on December 31, 2019 and that all distributions were reinvested on a quarterly basis. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 PAGP $ 100.00 $ 48.96 $ 63.11 $ 83.11 $ 114.79 $ 142.02 S&P 500 $ 100.00 $ 155.68 $ 200.37 $ 164.08 $ 207.21 $ 259.05 AMNA $ 100.00 $ 95.06 $ 131.58 $ 159.92 $ 182.34 $ 263.52 69 Table of Contents Index to Financial Statements This information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C under the Exchange Act, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” Our general partner owns a non-economic general partner interest in us, which does not entitle it to receive cash distributions.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” Our general partner owns a non-economic general partner interest in us, which does not entitle it to receive cash distributions. Item 6. Reserved
The following table presents cash distributions per Class A share pertaining to the quarter presented, which were declared and paid in the following calendar quarter (see the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments): First Quarter Second Quarter Third Quarter Fourth Quarter 2023 $ 0.2675 $ 0.2675 $ 0.2675 $ 0.3175 2022 $ 0.2175 $ 0.2175 $ 0.2175 $ 0.2675 Our Class A shares are also used as a form of compensation to our directors.
The following table presents cash distributions per Class A share pertaining to the quarter presented, which were declared and paid in the following calendar quarter (see the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments): First Quarter Second Quarter Third Quarter Fourth Quarter 2024 $ 0.3175 $ 0.3175 $ 0.3175 $ 0.3800 2023 $ 0.2675 $ 0.2675 $ 0.2675 $ 0.3175 Our Class A shares are also used as a form of compensation to our directors.
Therefore, our cash flow and resulting ability to make distributions is dependent upon the ability of PAA to make distributions to AAP in respect of the common units AAP owns. As of December 31, 2023, AAP owned approximately 232.7 million PAA common units.
Therefore, our cash flow and resulting ability to make distributions is dependent upon the ability of PAA to make distributions to AAP in respect of the common units AAP owns. As of December 31, 2024, AAP owned approximately 232.9 million PAA common units.
Our principal source of cash flow is derived from our indirect investment in PAA. As of December 31, 2023, we owned approximately 196.4 million AAP units, which represented an approximate 84% limited partner interest in AAP. AAP currently receives all of its cash flows from its ownership of PAA common units.
Our principal source of cash flow is derived from our indirect investment in PAA. As of December 31, 2024, we owned approximately 197.5 million AAP units, which represented an approximate 85% limited partner interest in AAP. AAP currently receives all of its cash flows from its ownership of PAA common units.
Market for Registrant’s Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Distributions Our Class A shares are listed and traded on The Nasdaq Global Select Market under the symbol “PAGP.” As of February 16, 2024, there were 197,121,318 Class A shares outstanding and approximately 67,000 record holders and beneficial owners (held in street name).
Item 5. Market for Registrant’s Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Distributions Our Class A shares are listed and traded on Nasdaq under the symbol “PAGP.” As of February 14, 2025, there were 197,743,624 Class A shares outstanding and approximately 85,000 record holders and beneficial owners (held in street name).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

110 edited+24 added−30 removed92 unchanged
Biggest changeThe segment results also include the direct fixed and variable field costs of operating the crude oil assets, as well as an allocation of indirect operating costs. 78 Table of Contents Index to Financial Statements The following tables set forth our operating results from our Crude Oil segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2023 2022 $ % Revenues $ 47,174 $ 55,080 $ (7,906) (14) % Purchases and related costs (43,805) (52,088) 8,283 16 % Field operating costs (1,053) (1,003) (50) (5) % Segment general and administrative expenses (2) (271) (250) (21) (8) % Equity earnings in unconsolidated entities 369 403 (34) (8) % Adjustments (3) : Depreciation and amortization of unconsolidated entities 87 85 2 2 % Derivative activities and inventory valuation adjustments 17 (11) 28 ** Long-term inventory costing adjustments 22 (3) 25 ** Deficiencies under minimum volume commitments, net 12 7 5 ** Equity-indexed compensation expense 35 32 3 ** Foreign currency revaluation 19 3 16 ** Line 901 incident 10 95 (85) ** Transaction-related expenses 1 — 1 ** Segment amounts attributable to noncontrolling interests in consolidated joint ventures (454) (364) (90) ** Segment Adjusted EBITDA $ 2,163 $ 1,986 $ 177 9 % Maintenance capital expenditures $ 145 $ 112 $ 33 29 % Average Volumes Year Ended December 31, Variance 2023 2022 Volumes % Crude oil pipeline tariff (by region) (4) Permian Basin (5) 6,356 5,638 718 13 % Other (5) 2,104 1,927 177 9 % Total crude oil pipeline tariff 8,460 7,565 895 12 % Commercial crude oil storage capacity (5) (6) 72 72 — — % Crude oil lease gathering purchases (4) (7) 1,452 1,382 70 5 % ** Indicates that variance as a percentage is not meaningful.
Biggest changeThe segment results also include the direct fixed and variable field costs of operating the crude oil assets, as well as an allocation of indirect operating costs. 78 Table of Contents Index to Financial Statements The following tables set forth our operating results from our Crude Oil segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2024 2023 $ % Revenues $ 48,720 $ 47,174 $ 1,546 3 % Purchases and related costs (2) (45,033) (43,805) (1,228) (3) % Field operating costs (2) (1,440) (1,053) (387) (37) % Segment general and administrative expenses (2) (3) (298) (271) (27) (10) % Equity earnings in unconsolidated entities 452 369 83 22 % Other segment items (4) : Depreciation and amortization of unconsolidated entities 84 87 (3) (3) % Derivative activities and inventory valuation adjustments 5 17 (12) ** Long-term inventory costing adjustments 1 22 (21) ** Deficiencies under minimum volume commitments, net (31) 12 (43) ** Equity-indexed compensation expense 36 35 1 ** Foreign currency revaluation (22) 19 (41) ** Line 901 incident 345 10 335 ** Transaction-related expenses — 1 (1) ** Segment amounts attributable to noncontrolling interests in consolidated joint ventures (543) (454) (89) ** Segment Adjusted EBITDA $ 2,276 $ 2,163 $ 113 5 % Maintenance capital expenditures $ 183 $ 145 $ 38 26 % Average Volumes Year Ended December 31, Variance 2024 2023 Volumes % Crude oil pipeline tariff (by region) (5) Permian Basin (6) 6,731 6,356 375 6 % Rocky Mountain (6) 474 372 102 27 % Other (6) 1,729 1,732 (3) — % Total crude oil pipeline tariff 8,934 8,460 474 6 % Commercial crude oil storage capacity (6) (7) 72 72 — — % Crude oil lease gathering purchases (5) (8) 1,586 1,452 134 9 % ** Indicates that variance as a percentage is not meaningful.
As one of the largest midstream service providers in North America, PAA owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins (including the Permian Basin) and transportation corridors and at major market hubs in the United States and Canada.
As one of the largest crude oil midstream service providers in North America, PAA owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins (including the Permian Basin) and transportation corridors and at major market hubs in the United States and Canada.
In addition, we may use cash for repurchases of common equity. We generally expect to fund our short-term cash requirements through cash flow generated from operating activities and/or borrowings under credit facilities or PAA’s commercial paper program.
In addition, we may use cash for repurchases of common equity. We generally expect to fund our short-term cash requirements through cash flow generated from operating activities and/or borrowings under PAA’s credit facilities or commercial paper program.
We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus (d) our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities, further adjusted (e) for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of the applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance and (f) to exclude the portion of all preceding items that is attributable to noncontrolling interests in consolidated joint venture entities (“Segment amounts attributable to noncontrolling interests in consolidated joint ventures”).
We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) significant segment expenses including: (i) purchases and related costs, (ii) field operating costs and (iii) segment general and administrative expenses, plus (b) our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities, further adjusted (c) for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of the applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance and (d) to exclude the portion of all preceding items that is attributable to noncontrolling interests in consolidated joint venture entities (“Segment amounts attributable to noncontrolling interests in consolidated joint ventures”).
Crude Oil Segment Our Crude Oil segment operations generally consist of gathering and transporting crude oil using pipelines, gathering systems, trucks and at times on barges or railcars, in addition to providing terminalling, storage and other related services utilizing our integrated assets across the United States and Canada.
Crude Oil Segment Our Crude Oil segment operations generally consist of gathering and transporting crude oil using pipelines (including gathering systems), trucks and, at times, on barges or railcars, in addition to providing terminalling, storage and other related services utilizing our integrated assets across the United States and Canada.
In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods. 90 Table of Contents Index to Financial Statements Investments in unconsolidated entities accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that a decline in value may be other than temporary.
In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods. 91 Table of Contents Index to Financial Statements Investments in unconsolidated entities accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that a decline in value may be other than temporary.
Our NGL revenues are primarily derived from a combination of (i) providing gathering, fractionation, storage, and/or terminalling services to third-party customers for a fee, and (ii) extracting NGL mix from the gas stream processed at our Empress straddle plant facility as well as acquiring NGL mix, which is then transported, stored and fractionated into finished products and sold to customers.
Our NGL revenues are primarily derived from a combination of (i) providing gathering, fractionation, storage, and/or terminalling services to third-party customers for a fee, and (ii) our merchant activities of extracting NGL mix from the gas stream processed at our Empress straddle plant facility as well as acquiring NGL mix, which is then transported, stored and fractionated into finished products and sold to customers.
(3) For a more detailed discussion of these selected items impacting comparability, see the footnotes to the Segment Adjusted EBITDA Reconciliation table in Note 19 to our Consolidated Financial Statements. (4) The Preferred Distribution Rate Reset Option of PAA’s Series A preferred units was accounted for as an embedded derivative and recorded at fair value in our Consolidated Financial Statements.
(4) For a more detailed discussion of these selected items impacting comparability, see the footnotes to the Segment Adjusted EBITDA Reconciliation table in Note 19 to our Consolidated Financial Statements. (5) The Preferred Distribution Rate Reset Option of PAA’s Series A preferred units was accounted for as an embedded derivative and recorded at fair value in our Consolidated Financial Statements.
See Note 11 to our Consolidated Financial Statements for details of distributions paid to noncontrolling interests during the three years ended December 31, 2023. Distributions to PAA’s Series A preferred unitholders. Holders of PAA’s Series A preferred units are entitled to receive quarterly distributions, subject to customary anti-dilution adjustments, of $0.615 per unit ($2.46 per unit annualized).
See Note 11 to our Consolidated Financial Statements for details of distributions paid to noncontrolling interests during the three years ended December 31, 2024. Distributions to PAA’s Series A preferred unitholders. Holders of PAA’s Series A preferred units are entitled to receive quarterly distributions, subject to customary anti-dilution adjustments, of $0.615 per unit ($2.46 per unit annualized).
PAA has filed with the SEC a universal shelf registration statement that, subject to effectiveness at the time of use, allows PAA to issue up to a specified amount of debt or equity securities (“PAA Traditional Shelf”), under which PAA had approximately $1.1 billion of unsold securities available at December 31, 2023.
PAA has filed with the SEC a universal shelf registration statement that, subject to effectiveness at the time of use, allows PAA to issue up to a specified amount of debt or equity securities (“PAA Traditional Shelf”), under which PAA had approximately $1.1 billion of unsold securities available at December 31, 2024.
Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved. A hypothetical variance of 5% in our aggregate estimate for the accruals and contingent liabilities discussed above would have an impact on earnings of up to approximately $14 million.
Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved. A hypothetical variance of 5% in our aggregate estimate for the accruals and contingent liabilities discussed above would have an impact on earnings of up to approximately $13 million.
Additionally, we estimate the upcoming liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the years ended December 31, 2023, 2022 and 2021, we did not record any charges related to the valuation adjustment of our inventory.
Additionally, we estimate the upcoming liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the years ended December 31, 2024, 2023 and 2022, we did not record any charges related to the valuation adjustment of our inventory.
Uncertainties that impact these estimates include the costs associated with these activities and the timing of incurring such costs. A hypothetical variance of 5% in our aggregate estimate for the retirement obligations discussed above would have an impact on earnings of up to approximately $6 million.
Uncertainties that impact these estimates include the costs associated with these activities and the timing of incurring such costs. A hypothetical variance of 5% in our aggregate estimate for the retirement obligations discussed above would have an impact on earnings of up to approximately $7 million.
These include PAA’s $1.35 billion senior unsecured revolving credit facility maturing in 2028 (excluding a commitment of $64 million, which matures in 2027), $1.35 billion senior secured hedged inventory facility maturing in 2026 and $2.7 billion unsecured commercial paper program that is backstopped by PAA’s revolving credit facility and its hedged inventory facility.
These include PAA’s $1.35 billion senior unsecured revolving credit facility maturing in 2029 (excluding a commitment of $64 million, which matures in 2027), $1.35 billion senior secured hedged inventory facility maturing in 2027 (excluding a commitment of $64 million, which matures in 2026) and $2.7 billion unsecured commercial paper program that is backstopped by PAA’s revolving credit facility and its hedged inventory facility.
Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2024: 71 Table of Contents Index to Financial Statements World Liquid Fuels Production and Consumption Balance (1) (in millions of barrels per day) (1) Barrels produced and consumed per quarter.
Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2025: 71 Table of Contents Index to Financial Statements World Liquid Fuels Production and Consumption Balance (1) (in millions of barrels per day) (1) Barrels produced and consumed per quarter.
(2) Represents general and administrative expenses incremental to those of PAA, which are not allocated to our reporting segments in determining Segment Adjusted EBITDA and are excluded in the non-GAAP financial performance measures utilized by management.
(3) Represents general and administrative expenses incremental to those of PAA, which are not allocated to our reporting segments in determining Segment Adjusted EBITDA and are excluded in the non-GAAP financial performance measures utilized by management.
(5) During the periods presented, there were fluctuations in the value of CAD to USD, resulting in the realization of foreign exchange gains and losses on the settlement of foreign currency transactions as well as the revaluation of monetary assets and liabilities denominated in a foreign currency.
(6) During the periods presented, there were fluctuations in the value of CAD to USD, resulting in the realization of foreign exchange gains and losses on the settlement of foreign currency transactions as well as the revaluation of monetary assets and liabilities denominated in a foreign currency.
The distribution was paid to Class A shareholders of record as of January 31, 2024, with respect to the quarter ended December 31, 2023. See Note 11 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2023.
The distribution was paid to Class A shareholders of record as of January 31, 2025, with respect to the quarter ended December 31, 2024. See Note 11 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2024.
As long as PAA is in compliance with the provisions in its credit agreements, its ability to make distributions of available cash is not restricted. PAA was in compliance with the covenants contained in its credit agreements and indentures as of December 31, 2023.
As long as PAA is in compliance with the provisions in its credit agreements, its ability to make distributions of available cash is not restricted. PAA was in compliance with the covenants contained in its credit agreements and indentures as of December 31, 2024.
See Note 11 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2023. Contingencies For a discussion of contingencies that may impact us, see Note 18 to our Consolidated Financial Statements.
See Note 11 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2024. Contingencies For a discussion of contingencies that may impact us, see Note 18 to our Consolidated Financial Statements.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2023 compared to the year ended December 31, 2022. Net Revenues and Equity Earnings.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2024 compared to the year ended December 31, 2023. Net Revenues and Equity Earnings.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
(4) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability. 77 Table of Contents Index to Financial Statements (6) Other income/(expense), net on our Consolidated Statements of Operations, adjusted for selected items impacting comparability (“Adjusted other income/(expense), net”) is included in Adjusted EBITDA and excluded from Segment Adjusted EBITDA.
The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability. 77 Table of Contents Index to Financial Statements (7) “Other income/(expense), net” on our Consolidated Statements of Operations, adjusted for selected items impacting comparability (“Adjusted other income/(expense), net”) is included in Adjusted EBITDA and excluded from Segment Adjusted EBITDA.
As of December 31, 2023, noncontrolling interests in our subsidiaries consisted of (i) limited partner interests in PAA including a 70% interest in PAA’s common units and PAA’s Series A preferred units combined and 100% of PAA’s Series B preferred units, (ii) an approximate 16% limited partner interest in AAP, (iii) a 35% interest in the Permian JV, (iv) a 30% interest in Cactus II and (v) a 33% interest in Red River.
As of December 31, 2024, noncontrolling interests in our subsidiaries consisted of (i) limited partner interests in PAA including a 70% interest in PAA’s common units and PAA’s Series A preferred units combined and 100% of PAA’s Series B preferred units, (ii) an approximate 15% limited partner interest in AAP, (iii) a 35% interest in the Permian JV, (iv) a 30% interest in Cactus II and (v) a 33% interest in Red River.
None of these entities had debt outstanding as of December 31, 2023. We may elect at any time to make additional capital contributions to any of these entities.
None of these entities had debt outstanding as of December 31, 2024. We may elect at any time to make additional capital contributions to any of these entities.
At December 31, 2023 and 2022, we had outstanding letters of credit of approximately $205 million and $102 million, respectively. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Item 303 of Regulation S-K. Investments in Unconsolidated Entities We have invested in entities that are not consolidated in our financial statements.
At December 31, 2024 and 2023, we had outstanding letters of credit of approximately $90 million and $205 million, respectively. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Item 303 of Regulation S-K. Investments in Unconsolidated Entities We have invested in entities that are not consolidated in our financial statements.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2019 and the U.S.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2020 and the U.S.
(1) Revenues and costs and expenses include intersegment amounts. (2) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Represents components of significant segment expenses. (3) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Represents components of significant segment expenses. (3) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
AAP is a Delaware limited partnership that, as of December 31, 2023, directly owned a limited partner interest in PAA through its ownership of approximately 232.7 million PAA common units (approximately 30% of PAA’s total outstanding common units and Series A preferred units combined).
AAP is a Delaware limited partnership that, as of December 31, 2024, directly owned a limited partner interest in PAA through its ownership of approximately 232.9 million PAA common units (approximately 30% of PAA’s total outstanding common units and Series A preferred units combined).
The proceeds from divestitures for the year ended December 31, 2023 are primarily from the sale of our 21% non-operated/undivided joint interest in the Keyera Fort Saskatchewan facility in February 2023. See Note 7 to our Consolidated Financial Statements for additional information.
The proceeds from divestitures for the year ended December 31, 2023 are primarily from the sale of our 21% non-operated/UJI in the Keyera Fort Saskatchewan facility in February 2023. See Note 7 to our Consolidated Financial Statements for additional information.
Fees for our terminalling and storage services are based on capacity leases and throughput volumes. Generally, results from our merchant activities are impacted by (i) increases or decreases in our lease gathering crude oil purchases volumes and (ii) volatility in commodity prices, as well as grade and regional differentials and time spreads.
Fees for our terminalling and storage services are based on capacity leases and throughput volumes. Generally, results from our merchant activities are impacted by (i) increases or decreases in our lease gathering crude oil purchases volumes and (ii) volatility in commodity price differentials, particularly grade and location differentials, as well as time spreads.
“Risk Factors—Risks Related to PAA’s Business—Acquisitions and divestitures involve risks that may adversely affect PAA’s business.” Financing Activities Our financing activities primarily relate to funding investment capital projects, acquisitions and refinancing of debt maturities, as well as short-term working capital (including borrowings for NYMEX and ICE margin deposits) and hedged inventory borrowings related to our NGL business and contango market activities.
“Risk Factors—Risks Related to PAA’s Business—Acquisitions and divestitures involve risks that may adversely affect PAA’s business.” 85 Table of Contents Index to Financial Statements Financing Activities Our financing activities primarily relate to funding investment capital projects, acquisitions and refinancing of debt maturities, as well as short-term working capital (including borrowings for NYMEX and ICE margin deposits) and hedged inventory borrowings related to our NGL business and contango market activities.
The following table summarizes the proceeds received from divestitures during the last two years (in millions): Year Ended December 31, 2023 2022 Proceeds from divestitures (1) $ 328 $ 60 (1) Represents proceeds, including working capital adjustments, net of transaction costs.
The following table summarizes the proceeds received from divestitures during the last two years (in millions): Year Ended December 31, 2024 2023 Proceeds from divestitures (1) $ 13 $ 328 (1) Represents proceeds, including working capital adjustments, net of transaction costs.
See Note 18 to our Consolidated Financial Statements for further discussion regarding the Line 901 incident and our related insurance receivable. 91 Table of Contents Index to Financial Statements Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for information regarding the effect of recent accounting pronouncements on our Consolidated Financial Statements.
See Note 18 to our Consolidated Financial Statements for further discussion regarding the Line 901 incident and our related insurance receivable. Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for information regarding the effect of recent accounting pronouncements on our Consolidated Financial Statements.
Executive Summary Company Overview We are a Delaware limited partnership formed in 2013 that has elected to be taxed as a corporation for United States federal income tax purposes. As of December 31, 2023, our sole cash-generating assets consisted of an approximate 84% limited partner interest in AAP through our ownership of approximately 196.4 million AAP units.
Executive Summary Company Overview We are a Delaware limited partnership formed in 2013 that has elected to be taxed as a corporation for United States federal income tax purposes. As of December 31, 2024, our sole cash-generating assets consisted of an approximate 85% limited partner interest in AAP through our ownership of approximately 197.5 million AAP units.
“Market for Registrant’s Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy” for additional discussion regarding distributions. On February 14, 2024, we paid a quarterly distribution of $0.3175 per Class A share ($1.27 per Class A share on an annualized basis).
“Market for Registrant’s Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy” for additional discussion regarding distributions. On February 14, 2025, we paid a quarterly distribution of $0.38 per Class A share ($1.52 per Class A share on an annualized basis).
Additionally, maintenance capital for 2024 is currently projected to be approximately $250 million ($230 million net to our interest). We expect to fund our 2024 investment and maintenance capital expenditures primarily with retained cash flow. Divestitures Proceeds from the sale of assets have generally been used to fund our investment capital projects and reduce debt levels.
Additionally, maintenance capital for 2025 is currently projected to be approximately $260 million ($240 million net to our interest). We expect to fund our 2025 investment and maintenance capital expenditures primarily with retained cash flow. Divestitures Proceeds from the sale of assets have historically generally been used to fund our investment capital projects and reduce debt levels.
We have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $750 million, which includes actual and projected emergency response and clean-up costs, natural resource damage assessments, fines and penalties payable pursuant to the Consent Decree, certain third-party claims settlements, and estimated costs associated with our remaining Line 901 lawsuits and claims, as well as estimates for certain legal fees and statutory interest where applicable.
As of December 31, 2024, we have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $870 million, which includes actual and projected emergency response and clean-up costs, natural resource damage assessments, fines and penalties incurred, certain third-party claims settlements, and estimated costs associated with our remaining Line 901 lawsuits and claims, as well as estimates for certain legal fees and statutory interest where applicable.
Less than 1% of total annual revenues are based on estimates derived from internal valuation models. Although the resolution of the uncertainties involved in these estimates has not historically had a material impact on our results of operations or financial condition, we cannot provide assurance that actual amounts will not vary significantly from estimated amounts. See Item 7A.
Less than 1% of total annual revenues are based on estimates derived from internal valuation models. 90 Table of Contents Index to Financial Statements Although the resolution of the uncertainties involved in these estimates has not historically had a material impact on our results of operations or financial condition, we cannot provide assurance that actual amounts will not vary significantly from estimated amounts.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.
Various factors could impact the timing and amount of recovery of our insurance receivable, including future developments that adversely impact our assessment of the strength of our coverage claims, the outcome of any dispute resolution proceedings with respect to our coverage claims and the extent to which insurers may become insolvent in the future.
However, at that time we also noted that various factors could impact the timing and amount of recovery of our insurance receivable, including future developments that adversely impacted our assessment of the strength of our coverage claims, the outcome of any dispute resolution proceedings with respect to our coverage claims (including arbitration proceedings) and the extent to which insurers may become insolvent in the future.
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2023 2022 Investment capital (1) (2) (3) $ 399 $ 334 Maintenance capital (1) (3) 231 211 Acquisition capital (2) (4) 431 284 $ 1,061 $ 829 (1) Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as “Investment capital.” Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as “Maintenance capital.” (2) Contributions to unconsolidated entities, accounted for under the equity method of accounting, that are related to investment capital projects by such entities are recognized in “Investment capital.” Acquisitions of initial investments or additional interests in unconsolidated entities are included in “Acquisition capital.” (3) Investment capital and maintenance capital, net to our 65% interest in the Permian JV, was approximately $310 million and $214 million, respectively, for 2023, and approximately $265 million and $202 million, respectively, for 2022.
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2024 2023 Investment capital (1) (2) (3) $ 415 $ 399 Maintenance capital (1) (3) 261 231 Acquisition capital (2) (4) 254 431 $ 930 $ 1,061 (1) Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as “Investment capital.” Capital expenditures made to replace and/or refurbish partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as “Maintenance capital.” (2) Contributions to unconsolidated entities, accounted for under the equity method of accounting, that are related to investment capital projects by such entities are recognized in “Investment capital.” Acquisitions of initial investments or additional interests in unconsolidated entities are included in “Acquisition capital.” (3) Investment capital and maintenance capital, net to our 65% interest in the Permian JV, was approximately $329 million and $242 million, respectively, for 2024, and approximately $310 million and $214 million, respectively, for 2023.
Our discussion and analysis includes the following: • Executive Summary • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements A comparative discussion of our 2022 to 2021 operating results and performance measures can be found in Item 7.
Our discussion and analysis includes the following: 70 Table of Contents Index to Financial Statements • Executive Summary • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements A comparative discussion of our 2023 to 2022 operating results and performance measures can be found in Item 7.
On February 14, 2024, PAA paid a quarterly distribution of $0.3175 per common unit ($1.27 per common unit on an annualized basis). The total distribution of $223 million was paid to common unitholders of record as of January 31, 2024, with respect to the quarter ended December 31, 2023.
On February 14, 2025, PAA paid a quarterly distribution of $0.38 per common unit ($1.52 per common unit on an annualized basis). The total distribution of $267 million was paid to common unitholders of record as of January 31, 2025, with respect to the quarter ended December 31, 2024.
We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors. 88 Table of Contents Index to Financial Statements We believe that the assumptions, judgments and estimates involved in the accounting for our (i) estimated fair value of assets and liabilities acquired and identification of associated goodwill and intangible assets, (ii) fair value of derivatives, (iii) accruals and contingent liabilities, (iv) property and equipment, depreciation and amortization expense and asset retirement obligations, (v) impairment assessments of property and equipment, investments in unconsolidated entities and intangible assets and (vi) inventory valuations have the greatest potential impact on our Consolidated Financial Statements.
We believe that the assumptions, judgments and estimates involved in the accounting for our (i) estimated fair value of assets and liabilities acquired and identification of associated goodwill and intangible assets, (ii) fair value of derivatives, (iii) accruals and contingent liabilities, (iv) property and equipment, depreciation and amortization expense and asset retirement obligations, (v) impairment assessments of property and equipment, investments in unconsolidated entities and intangible assets and (vi) inventory valuations have the greatest potential impact on our Consolidated Financial Statements.
Segment Adjusted EBITDA Crude Oil Segment Adjusted EBITDA increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to higher tariff volumes, tariff escalations and contributions from acquisitions. These items were partially offset by fewer market-based opportunities for our merchant activities.
Segment Adjusted EBITDA Crude Oil Segment Adjusted EBITDA increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to higher tariff volumes on our pipelines, tariff escalations and contributions from acquisitions, partially offset by fewer market-based opportunities.
Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Although we believe these estimates are reasonable, actual results could differ from these estimates. On a regular basis, we evaluate our assumptions, judgments and estimates.
Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Although we believe these estimates are reasonable, actual results could differ from these estimates. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.
During 2023 and 2022, PAA repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 2023 $700 million 3.85% PAA Senior Notes due October 2023 October 2023 (1) 2023 $400 million 2.85% PAA Senior Notes due January 2023 January 2023 (1) 2022 $750 million 3.65% PAA Senior Notes due June 2022 March 2022 (1) (1) PAA repaid these senior notes with cash on hand and borrowings under its commercial paper program.
During 2024 and 2023, PAA repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 2024 $750 million 3.60% PAA Senior Notes due November 2024 November 2024 (1) 2023 $700 million 3.85% PAA Senior Notes due October 2023 October 2023 (2) 2023 $400 million 2.85% PAA Senior Notes due January 2023 January 2023 (2) (1) PAA repaid these senior notes with proceeds from its 5.70% senior notes issued in June 2024, cash on hand. and borrowings under its commercial paper program.
(4) Acquisition capital for 2023 primarily includes the acquisition by the Permian JV of (i) the remaining 43% interest in OMOG JV Holdings LLC and (ii) gathering assets in the Southern and Northern Delaware Basins.
(4) Acquisition capital for 2024 primarily includes the acquisitions of additional ownership interests in equity method investees. Acquisition capital for 2023 primarily includes the acquisition by the Permian JV of (i) the remaining 43% interest in OMOG JV Holdings LLC and (ii) gathering assets in the Southern and Northern Delaware Basins.
As of December 31, 2023, although we had a working capital deficit of $89 million, we had over $2.6 billion of liquidity available to meet our ongoing operating, investing and financing needs, subject to continued covenant compliance, as noted below (in millions): As of December 31, 2023 Availability under PAA senior unsecured revolving credit facility (1) (2) $ 1,350 Availability under PAA senior secured hedged inventory facility (1) (2) 1,279 Amounts outstanding under PAA commercial paper program (433) Subtotal 2,196 Cash and cash equivalents (3) 447 Total $ 2,643 (1) Represents availability prior to giving effect to borrowings outstanding under the PAA commercial paper program, which reduce available capacity under the facilities.
As of December 31, 2024, although we had a working capital deficit of $148 million, we had over $2.6 billion of liquidity available to meet our ongoing operating, investing and financing needs, subject to continued covenant compliance, as noted below (in millions): As of December 31, 2024 Availability under PAA senior unsecured revolving credit facility (1) (2) $ 1,350 Availability under PAA senior secured hedged inventory facility (1) (2) 1,333 Amounts outstanding under PAA commercial paper program (393) Subtotal 2,290 Cash and cash equivalents (3) 348 Total $ 2,638 82 Table of Contents Index to Financial Statements (1) Represents availability prior to giving effect to borrowings outstanding under the PAA commercial paper program, which reduce available capacity under the facilities.
Borrowings and Repayments Under Credit Arrangements During the year ended December 31, 2023, we had net borrowings under the PAA commercial paper program of $433 million.
Borrowings and Repayments Under Credit Arrangements During the year ended December 31, 2024, PAA had net repayments under its commercial paper program of $40 million.
(2) Available capacity under the PAA senior unsecured revolving credit facility and the PAA senior secured hedged inventory facility was reduced by outstanding letters of credit issued under these facilities of less than $1 million and $71 million, respectively. 82 Table of Contents Index to Financial Statements (3) Excludes restricted cash of $6 million.
(2) Available capacity under the PAA senior unsecured revolving credit facility and the PAA senior secured hedged inventory facility was reduced by outstanding letters of credit issued under these facilities of less than $1 million and $17 million, respectively. (3) Excludes restricted cash of $1 million.
(1) We exclude our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities when reviewing Adjusted EBITDA, similar to our consolidated assets.
(1) Represents “Interest expense, net” as reported on our Consolidated Statements of Operations. (2) We exclude our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities when reviewing Adjusted EBITDA, similar to our consolidated assets.
PAA also has access to a universal shelf registration statement (“PAA WKSI Shelf”), which provides it with the ability to offer and sell an unlimited amount of debt and equity securities, subject to market conditions and capital needs.
PAA did not conduct any offering under its Traditional Shelf during the year 2024. PAA also has access to a universal shelf registration statement (“PAA WKSI Shelf”), which provides it with the ability to offer and sell an unlimited amount of debt and equity securities, subject to market conditions and capital needs.
Significant variances in the components of Segment Adjusted EBITDA are discussed in more detail below: 81 Table of Contents Index to Financial Statements Net Revenues. Net revenues include the impact of derivative activities and long-term inventory costing adjustments, which are excluded from Segment Adjusted EBITDA and thus are reflected as an “Adjustment” in the table above.
Significant variances in the components of Segment Adjusted EBITDA are discussed in more detail below: Net Revenues. Net revenues include the impact of derivative activities and long-term inventory costing adjustments, which are excluded from Segment Adjusted EBITDA and thus are reflected as a component of “Other segment items” in the table above.
Our assets serve third parties and are also supported by our merchant activities. Our merchant activities include the purchase of crude oil supply and the movement of this supply on our assets or third-party assets to sales locations, including our terminals, third-party connecting carriers, regional hubs or to refineries.
Our assets provide services to third parties as well as to our merchant activities. Our merchant activities include the purchase of crude oil supply and the movement of this supply on our assets or third-party assets to sales locations, including our terminals, third-party connecting carriers, regional hubs or to refineries. Our merchant activities are governed by our risk management policies.
The Permian Basin continues to be one of the most prolific basins in the world and was the predominant driver of U.S. production growth in 2023. The remainder of the U.S. unconventional plays continue to see modest growth.
The Permian Basin continues to be one of the most prolific basins in the world and was the predominant driver of U.S. production growth in 2024.
Distributions on the Series B preferred units accumulate based on the applicable three-month SOFR, plus a credit spread adjustment of 0.26121%, plus 4.11% per annum. The distribution rate for the quarterly distribution paid on February 15, 2024 was 9.75093% per annum ($24.92 per Series B preferred unit). Distributions to PAA’s common unitholders.
Distributions on the Series B preferred units accumulate based on the applicable three-month SOFR, plus a credit spread adjustment of 0.26161%, plus 4.11% per annum. The distribution rate for the quarterly distribution paid on February 18, 2025 was 8.89507% per annum ($22.73 per Series B preferred unit). Distributions to PAA’s common unitholders.
The following table summarizes our investment in capital projects (in millions): Year Ended December 31, Projects 2023 2022 Complementary Permian Basin Projects (1) $ 266 $ 191 Permian Basin Takeaway Pipeline Projects (2) 34 33 Selected Facilities/Downstream Projects (3) 71 28 Other Projects 28 82 Total $ 399 $ 334 84 Table of Contents Index to Financial Statements (1) Includes projects associated with assets included in the Permian JV.
The following table summarizes our investment in capital projects (in millions): 84 Table of Contents Index to Financial Statements Year Ended December 31, Projects 2024 2023 Complementary Permian Basin Projects (1) $ 249 $ 266 Selected Facilities/Downstream Projects (2) 107 71 Other Projects 59 62 Total $ 415 $ 399 (1) Includes projects associated with assets included in the Permian JV.
Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors as discussed, as applicable, in “—Analysis of Operating Segments.” 76 Table of Contents Index to Financial Statements The following table sets forth the reconciliation of the non-GAAP financial performance measures Adjusted EBITDA and Adjusted EBITDA attributable to PAA from Net Income (in millions): Year Ended December 31, Variance 2023 2022 $ % Net income $ 1,425 $ 1,163 $ 262 23 % Interest expense, net 386 405 (19) (5) % Income tax expense 189 246 (57) (23) % Depreciation and amortization 1,051 968 83 9 % (Gains)/losses on asset sales and asset impairments, net (152) 269 (421) (157) % (Gains)/losses on investments in unconsolidated entities, net (28) (346) 318 92 % Depreciation and amortization of unconsolidated entities (1) 87 85 2 2 % Unallocated general and administrative expenses (2) 6 5 1 20 % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments 159 (280) 439 ** Long-term inventory costing adjustments 35 (4) 39 ** Deficiencies under minimum volume commitments, net 12 7 5 ** Equity-indexed compensation expense 36 32 4 ** Foreign currency revaluation 24 4 20 ** Line 901 incident 10 95 (85) ** Transaction-related expenses 1 — 1 ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (3) 277 (146) 423 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (4) (58) 189 (247) ** Foreign currency revaluation (5) (16) 37 (53) ** Selected Items Impacting Comparability - Adjusted EBITDA (6) 203 80 123 ** Adjusted EBITDA (6) $ 3,167 $ 2,875 $ 292 10 % Adjusted EBITDA attributable to noncontrolling interests in consolidated joint ventures (7) (456) (365) (91) (25) % Adjusted EBITDA attributable to PAA $ 2,711 $ 2,510 $ 201 8 % ** Indicates that variance as a percentage is not meaningful.
Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors as discussed, as applicable, in “—Analysis of Operating Segments.” 76 Table of Contents Index to Financial Statements The following table sets forth the reconciliation of the non-GAAP financial performance measures Adjusted EBITDA and Adjusted EBITDA attributable to PAA from Net Income (in millions): Year Ended December 31, Variance 2024 2023 $ % Net income $ 1,070 $ 1,425 $ (355) (25) % Interest expense, net of certain items (1) 382 386 (4) (1) % Income tax expense 204 189 15 8 % Depreciation and amortization 1,026 1,051 (25) (2) % (Gains)/losses on asset sales, asset impairments and other, net 160 (152) 312 205 % Gain on investments in unconsolidated entities, net (15) (28) 13 46 % Depreciation and amortization of unconsolidated entities (2) 84 87 (3) (3) % Unallocated general and administrative expenses (3) 6 6 — — % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments 85 159 (74) ** Long-term inventory costing adjustments (9) 35 (44) ** Deficiencies under minimum volume commitments, net (31) 12 (43) ** Equity-indexed compensation expense 36 36 — ** Foreign currency revaluation (27) 24 (51) ** Line 901 incident 345 10 335 ** Transaction-related expenses — 1 (1) ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (4) 399 277 122 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (5) — (58) 58 ** Foreign currency revaluation (6) 10 (16) 26 ** Selected Items Impacting Comparability - Adjusted EBITDA (6) 409 203 206 ** Adjusted EBITDA (7) $ 3,326 $ 3,167 $ 159 5 % Adjusted EBITDA attributable to noncontrolling interests in consolidated joint ventures (8) (547) (456) (91) (20) % Adjusted EBITDA attributable to PAA $ 2,779 $ 2,711 $ 68 3 % ** Indicates that variance as a percentage is not meaningful.
The following table presents the range of the NYMEX WTI benchmark price of crude oil over the last two years (in dollars per barrel): NYMEX WTI Crude Oil Price During the Year Ended December 31, Low High Average 2023 $ 67 $ 94 $ 78 2022 $ 71 $ 124 $ 94 Product sales revenues and purchases decreased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to lower commodity prices in 2023.
The following table presents the range of the NYMEX Price over the last two years (in dollars per barrel): NYMEX Price During the Year Ended December 31, Low High Average 2024 $ 66 $ 87 $ 76 2023 $ 67 $ 94 $ 78 Product sales revenues and purchases increased for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to higher crude oil sales volumes.
Other Income/(Expense), Net The following table summarizes the components impacting Other income/(expense), net (in millions): Year Ended December 31, 2023 2022 Gain/(loss) on mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (1) $ 58 $ (189) Net gain/(loss) on foreign currency revaluation (2) 15 (36) Other 29 6 $ 102 $ (219) (1) See Note 12 to our Consolidated Financial Statements for additional information.
See Note 7 to our Consolidated Financial Statements for additional information regarding these transactions. 74 Table of Contents Index to Financial Statements Other Income/(Expense), Net The following table summarizes the components impacting Other income/(expense), net (in millions): Year Ended December 31, 2024 2023 Interest income $ 22 $ 27 Net gain/(loss) on foreign currency revaluation (1) (10) 15 Gain on mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (2) — 58 Other 5 2 $ 17 $ 102 (1) See Note 12 to our Consolidated Financial Statements for additional information.
The majority of this investment capital consists of highly-contracted projects that complement our broader system capabilities and support the long-term needs of the upstream and downstream sectors of the industry value chain.
Investment Capital Projects Our investment capital programs consist of investments in midstream infrastructure projects that build upon our core assets and operations. The majority of this investment capital consists of highly-contracted projects that complement our broader system capabilities and support the long-term needs of the upstream and downstream sectors of the industry value chain.
Investing Activities Capital Expenditures In addition to our operating needs, we also use cash for our investment capital projects, maintenance capital activities and acquisition activities. We fund these expenditures with cash generated by operating activities, financing activities and/or proceeds from asset sales. In the near term, we do not plan to issue common equity to fund such expenditures.
We fund these expenditures with cash generated by operating activities, financing activities and/or proceeds from asset sales. In the near term, we do not plan to issue common equity to fund such expenditures.
The increase in field operating costs for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to (i) an increase in unrealized mark-to-market losses on power hedges (which impact our field operating costs but are excluded from Segment Adjusted EBITDA and thus are reflected as an “Adjustment” in the table above) and (ii) increased utilities-related costs largely as a result of the increase in our Empress ownership in the fourth quarter of 2022 and higher prices.
The decrease in field operating costs for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to (i) decreased utilities-related costs largely as a result of lower prices and (ii) a decrease in unrealized mark-to-market losses on power hedges (which impact our field operating costs, but are excluded from Segment Adjusted EBITDA, and thus are reflected as a component of “Other segment items” in the table above), partially offset by (iii) higher maintenance and repairs.
Volumes associated with acquisitions represent total volumes for the number of days we actually owned the assets divided by the number of days in the period.
Volumes associated with acquisitions represent total volumes for the number of days we actually owned the assets divided by the number of days in the period. (6) Includes volumes (attributable to our interest) from assets owned by unconsolidated entities.
Our financial strategy and long-term capital allocation framework is focused on generating meaningful multi-year free cash flow and improving shareholder returns by (i) increasing returns of capital to equity holders, primarily through increased distributions, (ii) making disciplined accretive investments and (iii) maintaining an investment grade credit profile and ensuring balance sheet flexibility. 72 Table of Contents Index to Financial Statements Overview of Operating Results We recognized net income of $1.425 billion for the year ended December 31, 2023 compared to net income of $1.163 billion for the year ended December 31, 2022.
Our financial strategy and long-term capital allocation framework is focused on generating meaningful multi-year free cash flow and improving shareholder returns by (i) increasing returns of capital to equity holders, primarily through increased distributions, (ii) making disciplined accretive investments and (iii) maintaining an investment grade credit profile and ensuring balance sheet flexibility.
See further discussion of net revenues (revenues less purchases and related costs) in the “—Analysis of Operating Segments” section below. Field Operating Costs See discussion of field operating costs in the “—Analysis of Operating Segments” section below.
Field Operating Costs See discussion of field operating costs in the “—Analysis of Operating Segments” section below.
Purchase Obligations In the ordinary course of doing business, we purchase crude oil and NGL from third parties under contracts, the majority of which range in term from thirty-day evergreen to five years, with a limited number of contracts with remaining terms extending up to 11 years.
Commitments See Note 10 to our Consolidated Financial Statements for information regarding our debt obligations and Note 18 for information regarding our leases and other commitments. 88 Table of Contents Index to Financial Statements Purchase Obligations In the ordinary course of doing business, we purchase crude oil and NGL from third parties under contracts, the majority of which range in term from thirty-day evergreen to five years, with a limited number of contracts with remaining terms extending up to 10 years.
The following tables set forth our operating results from our NGL segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2023 2022 $ % Revenues $ 1,935 $ 2,761 $ (826) (30) % Purchases and related costs (1,123) (1,587) 464 29 % Field operating costs (372) (312) (60) (19) % Segment general and administrative expenses (2) (79) (75) (4) (5) % Adjustments (3) : Derivative activities 142 (269) 411 ** Long-term inventory costing adjustments 13 (1) 14 ** Equity-indexed compensation expense 1 — 1 ** Foreign currency revaluation 5 1 4 ** Segment Adjusted EBITDA $ 522 $ 518 $ 4 1 % Maintenance capital expenditures $ 86 $ 99 $ (13) (13) % Year Ended December 31, Variance Average Volumes (in thousands of barrels per day) (4) 2023 2022 Volumes % NGL fractionation 115 137 (22) (16) % NGL pipeline tariff 180 192 (12) (6) % Propane and butane sales 86 94 (8) (9) % ** Indicates that variance as a percentage is not meaningful.
The following tables set forth our operating results from our NGL segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2024 2023 $ % Revenues $ 1,724 $ 1,935 $ (211) (11) % Purchases and related costs (2) (898) (1,123) 225 20 % Field operating costs (2) (328) (372) 44 12 % Segment general and administrative expenses (2) (3) (83) (79) (4) (5) % Other segment items (4) : Derivative activities 80 142 (62) ** Long-term inventory costing adjustments (10) 13 (23) ** Equity-indexed compensation expense — 1 (1) ** Foreign currency revaluation (5) 5 (10) ** Segment Adjusted EBITDA $ 480 $ 522 $ (42) (8) % Maintenance capital expenditures $ 78 $ 86 $ (8) (9) % Year Ended December 31, Variance Average Volumes (in thousands of barrels per day) (5) 2024 2023 Volumes % NGL fractionation 132 115 17 15 % NGL pipeline tariff 213 180 33 18 % Propane and butane sales 92 86 6 7 % ** Indicates that variance as a percentage is not meaningful.
Total investment capital for the year ending December 31, 2024 is currently projected to be approximately $465 million ($375 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets.
(2) Includes projects at our St. James and Fort Saskatchewan terminals. Projected 2025 Capital Expenditures. Total investment capital for the year ending December 31, 2025 is currently projected to be approximately $500 million ($400 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets.
We also have access to a universal shelf registration statement (“PAGP WKSI Shelf”), which provides us with the ability to offer and sell an unlimited amount of equity securities, subject to market conditions and its capital needs. PAA Registration Statements . PAA periodically accesses the capital markets for both equity and debt financing.
At December 31, 2024, we had approximately $939 million of unsold securities available under the PAGP Traditional Shelf. We also have access to a universal shelf registration statement (“PAGP WKSI Shelf”), which provides us with the ability to offer and sell an unlimited amount of equity securities, subject to market conditions and its capital needs. PAA Registration Statements .
The primary additional measures used by management are Adjusted EBITDA and Adjusted EBITDA attributable to PAA. Our definition and calculation of certain non-GAAP financial measures may not be comparable to similarly-titled measures of other companies.
Our definition and calculation of certain non-GAAP financial measures may not be comparable to similarly-titled measures of other companies.
The increase in maintenance capital spending for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to ongoing facility maintenance investments, tractor trailer leases, integrity projects and tank maintenance. NGL Segment Our NGL segment operations involve natural gas processing and NGL fractionation, storage, transportation and terminalling.
The increase in maintenance capital spending for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to (i) an increase in integrity management, maintenance and repairs and replacement projects and (ii) more trucking lease buyouts. NGL Segment Our NGL segment operations involve natural gas processing and NGL fractionation, storage, transportation and terminalling.
The net borrowings resulted primarily from borrowings during the year related to funding needs for capital investments, inventory purchases and other general partnership purposes. 85 Table of Contents Index to Financial Statements We had no net borrowings or repayments under the PAA credit facilities or commercial paper program during the year ended December 31, 2022.
During the year ended December 31, 2023, PAA had net borrowings under the PAA commercial paper program of $433 million. The net borrowings resulted primarily from borrowings during the year related to funding needs for capital investments, inventory purchases and other general partnership purposes. Senior Notes Issuances of PAA Senior Notes.
Revenues and Purchases Fluctuations in our consolidated revenues and purchases and related costs are primarily associated with our merchant activities and generally explained in large part by changes in commodity prices.
Revenues and Purchases Fluctuations in our consolidated revenues and purchases and related costs are primarily associated with our merchant activities and are generally explained by changes in commodity prices and the impact of gains and losses related to derivative instruments used to manage our commodity price exposure.
(5) Includes volumes (attributable to our interest) from assets owned by unconsolidated entities. 79 Table of Contents Index to Financial Statements (6) Average monthly capacity in millions of barrels per day calculated as total volumes for the year divided by the number of months in the year.
See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments. 79 Table of Contents Index to Financial Statements (5) Average daily volumes in thousands of barrels per day calculated as the total volumes (attributable to our interest for assets owned by unconsolidated entities or through UJIs) for the year divided by the number of days in the year.
Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was approximately $2.7 billion and $2.4 billion, respectively, and primarily resulted from earnings from our operations.
Net cash provided by operating activities for the years ended December 31, 2024 and 2023 was approximately $2.5 billion and $2.7 billion, respectively, and primarily resulted from earnings from our operations. Investing Activities Capital Expenditures In addition to our operating needs, we also use cash for our investment capital projects, maintenance capital activities and acquisition activities.
In periods when the market is not in contango, we typically sell our crude oil during the same month in which we purchase it and we do not rely on borrowings under the PAA credit facilities or commercial paper program to pay for the crude oil.
Similarly, the level of NGL and other product inventory stored and held for resale at period end affects our cash flow from operating activities. 83 Table of Contents Index to Financial Statements In periods when the market is not in contango, we typically sell our crude oil during the same month in which we purchase it and we do not rely on borrowings under the PAA credit facilities or commercial paper program to pay for the crude oil.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe fair value of our commodity derivatives and the change in fair value as of December 31, 2023 that would be expected from a 10% price increase or decrease is shown in the table below (in millions): Fair Value Effect of 10% Price Increase Effect of 10% Price Decrease Crude oil $ (2) $ (49) $ 49 Natural gas (66) $ 12 $ (12) NGL and other 68 $ (51) $ 51 Total fair value $ — 92 Table of Contents Index to Financial Statements The fair values presented in the table above reflect the sensitivity of the derivative instruments only and do not include the effect of the underlying hedged commodity.
Biggest changeThe fair value of our commodity derivatives and the change in fair value as of December 31, 2024 that would be expected from a 10% price increase or decrease is shown in the table below (in millions): 93 Table of Contents Index to Financial Statements Fair Value Effect of 10% Price Increase Effect of 10% Price Decrease Crude oil $ 7 $ (3) $ 5 Natural gas (22) $ 6 $ (6) NGL and other (61) $ (46) $ 46 Total fair value $ (76) The fair values presented in the table above reflect the sensitivity of the derivative instruments only and do not include the effect of the underlying hedged commodity.
Based upon the Series B preferred units outstanding at December 31, 2023 and the liquidation preference of $1,000 per unit, a change of 100 basis points in interest rates would increase or decrease the annual distributions on PAA’s Series B preferred units by approximately $8 million.
Based upon the Series B preferred units outstanding at December 31, 2024 and the liquidation preference of $1,000 per unit, a change of 100 basis points in interest rates would increase or decrease the annual distributions on PAA’s Series B preferred units by approximately $8 million.
A 10% decrease in the forward SOFR curve as of December 31, 2023 would have resulted in a decrease of $18 million to the fair value of our interest rate derivatives. See Note 12 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities. Series B Preferred Units .
A 10% decrease in the forward SOFR curve as of December 31, 2024 would have resulted in a decrease of $13 million to the fair value of our interest rate derivatives. See Note 12 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities. Series B Preferred Units .
See Note 11 to our Consolidated Financial Statements for additional information on PAA’s Series B preferred units. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.
See Note 11 to our Consolidated Financial Statements for additional information regarding PAA’s Series B preferred unit distributions. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.
A 10% increase in the forward SOFR curve as of December 31, 2023 would have resulted in an increase of $18 million to the fair value of our interest rate derivatives.
A 10% increase in the forward SOFR curve as of December 31, 2024 would have resulted in an increase of $13 million to the fair value of our interest rate derivatives.
The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2023 was 5.8%, based upon rates in effect during the year. The fair value of our interest rate derivatives was an asset of $55 million as of December 31, 2023.
The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2024 was 5.6%, based upon rates in effect during the year. The fair value of our interest rate derivatives was a net asset of $27 million as of December 31, 2024.
All of PAA’s senior notes are fixed rate notes and thus are not subject to interest rate risk. Our variable rate debt outstanding at December 31, 2023, approximately $433 million, was subject to interest rate resets that generally range from less than one week to approximately one month.
All of PAA’s senior notes are fixed rate notes and thus are not subject to interest rate risk. Our variable rate debt outstanding at December 31, 2024, approximately $393 million, was subject to interest rate resets that generally occur within one week or less.

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