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What changed in PLAINS GP HOLDINGS LP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PLAINS GP HOLDINGS LP's 2022 and 2023 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 2023 report.

+263 added−288 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in PLAINS GP HOLDINGS LP's 2023 10-K

263 paragraphs added · 288 removed · 222 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

82 edited+13 added−17 removed329 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 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; • pandemics, epidemics or other public health events; • 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 joint venture and joint ownership arrangements, acquisitions, divestitures 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; 38 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; • PAA’s current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in 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 • 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.
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.
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.
In addition, PAA’s merchant activities include purchasing crude oil and NGL that is carried on railcars, tankers or barges. Such cargos are at risk of being damaged or lost because of events such as derailment, marine disaster, inclement weather, mechanical failures, grounding or collision, fire, explosion, environmental accidents, piracy, terrorism and political instability.
In addition, PAA’s merchant activities may include purchasing crude oil and NGL that is carried on railcars, tankers or barges. Such cargos are at risk of being damaged or lost because of events such as derailment, marine disaster, inclement weather, mechanical failures, grounding or collision, fire, explosion, environmental accidents, piracy, terrorism and political instability.
Risks Related to PAA’s Business PAA’s profitability depends on the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of its facilities, which can be negatively impacted by a variety of factors outside of its control.
Risks Related to PAA’s Business PAA’s profitability depends on the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of its pipelines and facilities, which can be negatively impacted by a variety of factors outside of its control.
Risks Related to Laws and Regulations Impacting PAA’s Business PAA’s business may be adversely impacted by existing or new laws, executive orders and regulations relating to protection of the environment and wildlife, operational safety, pandemics, cross-border import/export and tax matters, financial and hedging activities, climate change and related matters.
Risks Related to Laws and Regulations Impacting PAA’s Business PAA’s business may be adversely impacted by existing or new laws, executive orders and regulations relating to protection of the environment and wildlife, operational safety, cross-border import/export and tax matters, financial and hedging activities, climate change and related matters.
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; 51 Table of Contents Index to Financial Statements • 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.
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.
If PAA is unable to successfully complete, integrate or realize the anticipated benefits of future acquisitions or planned divestitures (due to reduced investment in the energy sector, governmental action, litigation, counterparty non-performance or other factors), it may be more difficult for PAA to implement its business strategies, achieve its desired leverage levels, increase returns to equity holders or otherwise accomplish its financial goals.
If PAA is unable to successfully complete, integrate or realize the anticipated benefits of future acquisitions or planned divestitures (due to reduced investment in the energy sector, governmental action, litigation, counterparty non-performance or other factors), it may be more difficult for PAA to implement its business strategies, maintain its desired leverage levels, increase returns to equity holders or otherwise accomplish its financial goals.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” 55 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.” 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.
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 19 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. The terms of PAA’s indebtedness may limit its ability to borrow additional funds or capitalize on business opportunities.
Significant under-utilization of assets PAA leases or otherwise secures the right to use in connection with its business could have a significant negative impact on PAA’s profitability and cash flows. Many of PAA’s assets have been in service for many years and require significant expenditures to maintain them.
Significant under-utilization of assets PAA leases or otherwise secures the right to use in connection with its business could have a significant negative impact on PAA’s profitability and cash flows. Many of PAA’s assets have been in service for many years and require significant expenditures to maintain them or remove them from service.
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 2022 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 2023 will be realized and that a valuation allowance is not required.
As a result, its maintenance or repair costs may increase in the future. PAA’s pipelines, terminals, storage and processing and fractionation assets are generally long-lived assets, and many of them have been in service for many years. The age and condition of its assets could result in increased maintenance or repair expenditures in the future.
As a result, its maintenance, repair or asset retirement costs may increase in the future. PAA’s pipelines, terminals, storage and processing and fractionation assets are generally long-lived assets, and many of them have been in service for many years. The age and condition of its assets could result in increased maintenance, repair or asset retirement expenditures in the future.
Should Plains be targeted by any such litigation, it may incur liability, which, to the extent that societal pressures or political or other factors are involved, could be imposed without regard to causation or contribution to the asserted damage, or to other mitigating factors.
Should Plains be targeted by any such litigation, PAA may incur liability, which, to the extent that societal pressures or political or other factors are involved, could be imposed without regard to causation or contribution to the asserted damage, or to other mitigating factors.
PAA cannot provide any assurance as to the ultimate amount or timing of future pipeline integrity expenditures but any such expenditures could be significant. See “Environmental — General” in Note 19 to our Consolidated Financial Statements.
PAA cannot provide any assurance as to the ultimate amount or timing of future pipeline integrity expenditures but any such expenditures could be significant. See “Environmental — General” in Note 18 to our Consolidated Financial Statements.
Risks Inherent in an Investment in PAA PAA’s partnership structure carries inherent risks, including but not limited to: • cost reimbursements due to PAA’s general partner may be substantial and will reduce PAA’s cash available for distribution to its unitholders; • cash distributions are not guaranteed and may fluctuate with PAA’s performance and the establishment of financial reserves; and • PAA’s preferred units have rights, preferences and privileges that are not held by, and are preferential to the rights of, holders of PAA’s common units.
Risks Inherent in an Investment in PAA PAA’s partnership structure carries inherent risks, including but not limited to: • cost reimbursements due to PAA’s general partner may be substantial and will reduce PAA’s cash available for distribution to its unitholders; • cash distributions are not guaranteed and may fluctuate with PAA’s performance and the establishment of financial reserves; and • PAA’s preferred units have rights, preferences and privileges that are not the same as, and are preferential to, the rights of holders of PAA’s common units.
PAA has taken steps within its organization to implement processes and procedures designed to detect unauthorized trading; however, PAA can provide no assurance that these steps will detect and prevent all violations of its risk policies and procedures, particularly if deception, collusion or other intentional misconduct is involved. 54 Table of Contents Index to Financial Statements 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 has taken steps within its organization to implement processes and procedures designed to detect unauthorized trading and non-compliance with its risk policies; however, PAA can provide no assurance that these steps will detect and prevent all violations of its risk policies and procedures, particularly if deception, collusion or other intentional misconduct is involved. 55 Table of Contents Index to Financial Statements 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.
Following a decision issued in May 2017 by the Tenth Circuit Court of Appeals tribal ownership of even a very small fractional interest in tribal land owned or at one time owned by an individual Indian landowner, bars condemnation of any interest in the allotment.
Following a decision issued in May 2017 by the Tenth Circuit Court of Appeals tribal ownership of even a very small fractional interest in tribal land owned or at one time owned by an individual Native American landowner, bars condemnation of any interest in the allotment.
Increasing attention to climate change, societal expectations on companies to address climate change, investor expectations regarding voluntary ESG related disclosures, increasing mandatory ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for PAA’s services or the products it handles, reduced profits, increased legislative and judicial scrutiny, investigations and litigation, reputational damage, and negative impacts on PAA’s access to capital markets.
A focus on climate change, societal expectations on companies to address climate change, investor expectations regarding voluntary sustainability-related disclosures, increasing mandatory sustainability disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for PAA’s services or the products it handles, reduced profits, increased legislative and judicial scrutiny, investigations and litigation, reputational damage, and negative impacts on PAA’s access to capital markets.
At December 31, 2022, the Legacy Owners owned approximately 19% 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, 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.
There have been a variety of legislative and regulatory proposals to prohibit, restrict, or more closely regulate various forms of hydraulic fracturing; for example, the Governor of California issued an order in April 2021 directing the Department of Conservation’s Geologic Energy Management Division to initiate regulatory action to end the issuance of new permits for hydraulic fracturing by January 2024.
There have been a variety of legislative and regulatory proposals to prohibit, restrict, or more closely regulate various forms of hydraulic fracturing; for example, the Governor of California issued an order directing the Department of Conservation’s Geologic Energy Management Division to initiate regulatory action to end the issuance of new permits for hydraulic fracturing by early 2024.
The Legacy Owners may have interests that conflict with holders of our Class A shares. At December 31, 2022, the Legacy Owners owned approximately 19% of our outstanding Class A and Class B shares and approximately 19% 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, 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 Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted on July 21, 2010, 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 Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
PAA’s financial results could be adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is lower commodity prices. The full impact of the Dodd-Frank Act and related regulatory requirements upon PAA’s business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted.
PAA’s financial results could be adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is lower commodity prices. 62 Table of Contents Index to Financial Statements The full impact of the Dodd-Frank Act and related regulatory requirements upon PAA’s business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted.
Accordingly, loss of PAA’s investment grade credit ratings could adversely impact its cash flows, its ability to make distributions and the value of its outstanding equity and debt securities. 52 Table of Contents Index to Financial Statements PAA is exposed to the credit risk of its customers and other counterparties it transacts with in the ordinary course of its business activities.
Accordingly, loss of PAA’s investment grade credit ratings could adversely impact its cash flows, its ability to make distributions and the value of its outstanding equity and debt securities. PAA is exposed to the credit risk of its customers and other counterparties it transacts with in the ordinary course of its business activities.
As of December 31, 2022, PAA had approximately $3 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, 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.
“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, 2022, we owned an approximate 81% limited partner interest in AAP, which owned approximately 241.0 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, 2023, we owned an approximate 84% limited partner interest in AAP, which owned approximately 232.7 million PAA common units.
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.
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.
The incurrence of such expenses not covered by insurance, indemnity or reserves could materially adversely affect PAA’s results of operations. 58 Table of Contents Index to Financial Statements PAA currently devotes substantial resources to comply with DOT-mandated pipeline integrity rules.
The incurrence of such expenses not covered by insurance, indemnity or reserves could materially adversely affect PAA’s results of operations. PAA currently devotes substantial resources to comply with DOT-mandated pipeline integrity rules.
These rules are not applicable for tax years beginning on or prior to December 31, 2017. 64 Table of Contents Index to Financial Statements Taxable gain or loss on the sale of our Class A shares could be more or less than expected.
These rules are not applicable for tax years beginning on or prior to December 31, 2017. Taxable gain or loss on the sale of our Class A shares could be more or less than expected.
At December 31, 2022, through their ownership of Class B shares, the Legacy Owners held approximately 19% of the combined voting power of our Class A and Class B shares.
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.
A valuation allowance on our deferred tax asset could reduce our earnings. As of December 31, 2022, we had a gross deferred tax asset of approximately $1.4 billion.
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.
Drilling activity, crude oil production and benchmark crude oil prices can fluctuate significantly over time for a wide variety of reasons, including prevailing economic conditions, reduced demand by consumers for end products made with hydrocarbons, increased competition, adverse weather conditions, public health emergencies, and government laws and regulations affecting prices and production levels.
Drilling activity, crude oil production and benchmark crude oil prices can fluctuate significantly over time for a wide variety of reasons, including prevailing economic conditions, geopolitical conflicts or events, reduced demand by consumers for end products made with hydrocarbons, increased competition, adverse weather conditions, public health emergencies, and governmental actions and regulations affecting prices and production levels.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions and climate change would impact PAA’s business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on PAA’s business, demand for its services, financial condition, results of operations and cash flows.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions and climate change could impact PAA’s business, any such future laws and regulations could have a material adverse effect on its business, demand for our services, financial condition, results of operations and cash flows.
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 operations, revenues, expenses and profitability. 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. PAA has a history of making incremental additions to the miles of pipelines it owns, both through acquisitions and investment capital projects.
Businesses that do not adapt to or comply with investor or stakeholder expectations and standards, which are continuing to evolve, or businesses that are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or equity value of such business entity could be materially and adversely affected.
Businesses that do not adapt to or comply with investor or stakeholder expectations and standards, which are continuing to evolve, or businesses that are perceived to have not responded appropriately to concerns related to sustainability matters, regardless of whether there is a legal requirement to do so, may suffer reputational damage and the business, financial condition, and/or equity value of such business entity could be materially and adversely affected.
PAA is subject to increased concern by institutional investors with respect to the perceived social and environmental cost of its industry and its governance structure, which may adversely impact its ability to raise capital from such investors.
PAA is subject to scrutiny by financial stakeholders with respect to the perceived social and environmental cost of its industry and its governance structure, which may adversely impact its ability to raise capital from such investors.
As of December 31, 2022, the face value of PAA’s consolidated debt was approximately $8.5 billion (excluding unamortized discounts and debt issuance costs of approximately $46 million), substantially all of which was at fixed interest rates.
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.
At December 31, 2022, PAA had approximately $15.3 billion of net property and equipment, $961 million of linefill, $3.1 billion of investments accounted for under the equity method of accounting and approximately $2.1 billion of net intangible assets capitalized on its balance sheet.
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.
ESG factors are playing an increasingly important role in the investment decisions made by investors, and companies involved in certain industries or with certain governance structures, such as master limited partnerships, are receiving increased scrutiny. Investors’ increased focus and activism related to ESG and similar matters could constrain PAA’s ability to raise capital.
Sustainability factors play an important role in the investment decisions made by certain investors and banks, and companies involved in certain industries or with certain governance structures, such as master limited partnerships, are receiving increased scrutiny. Financial stakeholders’ focus and activism related to sustainability and similar matters could constrain PAA’s ability to raise capital.
As of December 31, 2022, the face value of PAA’s consolidated debt outstanding was approximately $8.5 billion (excluding unamortized discounts and debt issuance costs of approximately $46 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $1.2 billion of short-term borrowings.
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.
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.
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.
At December 31, 2022, the Legacy Owners owned approximately 19% of the Class A shares and Class B shares on a combined basis.
At December 31, 2023, the Legacy Owners owned approximately 16% of the Class A shares and Class B shares on a combined basis.
Because distributions on PAA’s common units are dependent on the amount of cash it generates, distributions may fluctuate based on PAA’s performance, which will result in fluctuations in the amount of distributions ultimately received by AAP.
Cash distributions are not guaranteed and may fluctuate with PAA’s performance and the establishment of financial reserves. Because distributions on PAA’s common units are dependent on the amount of cash it generates, distributions may fluctuate based on PAA’s performance, which will result in fluctuations in the amount of distributions ultimately received by AAP.
PAA has a number of minimum volume commitment contracts that support its pipelines. In addition, certain of the pipelines in which PAA owns a joint venture interest have minimum volume commitment contracts.
In addition, certain of the pipelines in which PAA owns a joint venture interest have minimum volume commitment contracts.
Supply and demand for crude oil and other hydrocarbon products PAA handles is dependent upon a variety of factors, including price, current and future economic conditions, fuel conservation measures, alternative fuel adoption, governmental regulation, including climate change regulations, and technological advances in fuel economy and energy generation and storage technologies.
Supply and demand for crude oil and other hydrocarbon products PAA handles can fluctuate based on a variety of factors, including price, current and future economic conditions, geopolitical conflicts or events, fuel conservation measures, alternative fuel adoption, governmental regulation, including climate change regulations, and technological advances in fuel economy and energy generation and storage technologies.
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; 53 Table of Contents Index to Financial Statements • 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.
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.
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 from the oil and natural gas industry, restrict the areas in which this 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 increased compliance costs, which if passed on to the customer could also result in increased fossil fuel consumption costs, and thereby reduce demand for crude oil and natural gas, and thus PAA’s services.
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.
At December 31, 2022, we owned an approximate 81% limited partner interest in AAP, which directly owned a limited partner interest in PAA through its ownership of approximately 241.0 million PAA common units (approximately 31% of PAA’s Series A preferred units and common units combined).
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).
In recent years, certain financial stakeholders, including institutional investors such as public pension funds, have placed increased importance on the implications and social cost of ESG matters.
Certain financial stakeholders, including certain institutional investors such as public pension funds and banks, have placed importance on the implications and social cost of sustainability matters.
The SEC missed its self-imposed October 2022 deadline for issuing a final rule and most commentators now expect a final rule to be issued in 2023.
The SEC missed its self-imposed October 2022 deadline for issuing a final rule and many commentators now expect a final rule to be issued in the first half of 2024.
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.
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.
PAA may enter into new businesses in connection with its strategy to participate in emerging energy opportunities. If PAA is unable to execute on this strategy or operate these new lines of business effectively, PAA’s future growth could be limited. These new lines of business may never develop or may present risks that PAA cannot effectively manage.
If PAA is unable to execute on this strategy or operate these new lines of business effectively, PAA’s future growth could be limited. These new lines of business may never develop or may present risks that PAA cannot effectively manage.
PAA may face opposition from various groups to the development or operation of its pipelines and facilities and PAA’s business may be subject to societal and political pressures. PAA may face opposition to the development or operation of its pipelines and facilities from environmental groups, landowners, indigenous groups, local groups and other advocates.
PAA may face opposition to the development or operation of its pipelines and facilities from environmental groups, landowners, indigenous groups, local groups and other advocates.
In addition, enhanced climate-related disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors.
In addition, enhanced climate-related disclosure requirements could influence stakeholders and lenders to restrict or seek more stringent conditions with respect to their investments in certain carbon-intensive sectors.
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. 60 Table of Contents Index to Financial Statements Finally, the Dodd-Frank Act was intended, in part, to reduce the volatility of oil and gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil and gas.
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.
Similarly, such activism could negatively impact PAA’s unit price, limiting its ability to raise capital through equity issuances or debt financing, or could negatively affect its ability to engage in, expand or pursue its business activities, and could also prevent it from engaging in certain transactions that might otherwise be considered beneficial to PAA. 50 Table of Contents Index to Financial Statements Businesses across all industries are facing increasing attention from stakeholders related to their ESG practices.
Similarly, such activism could negatively impact PAA’s unit price or the price of its debt, limiting its ability to raise capital through equity issuances or debt financing, or could negatively affect its ability to engage in, expand or pursue its business activities, and could also prevent it from engaging in certain transactions that might otherwise be considered beneficial to PAA.
Additionally, the designation of previously unprotected species or the re-designation of under-protected species as threatened or endangered in areas where PAA or its customers conduct operations could cause PAA to incur increased costs arising from species protection measures or could result in delays, restrictions or prohibitions on PAA’s customers’ development and production activities that could have a material adverse effect on its results of operations.
Additionally, the designation of previously unprotected species or the re-designation of under-protected species as threatened or endangered in areas where PAA or its customers conduct operations could cause PAA to incur increased costs arising from species protection measures or could result in delays, restrictions or prohibitions on PAA’s customers’ development and production activities that could have a material adverse effect on its results of operations. 63 Table of Contents Index to Financial Statements Risks Inherent in an Investment in PAA Cost reimbursements due to PAA’s general partner may be substantial and will reduce PAA’s cash available for distribution to its unitholders.
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.
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.
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 business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
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.
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. In turn, this could negatively impact PAA’s cash flow and its ability to make or increase cash distributions to its partners.
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.
The potential impact of changing demand for crude oil and natural gas services and products may have a material adverse effect on PAA’s business, financial condition, results of operations and cash flows.
Government initiatives or technological advances may also create new competitive conditions that result in reduced demand for products PAA’s customers produce and, in turn, the services PAA provides. The potential impact of changing demand for crude oil and natural gas services and products may have a material adverse effect on PAA’s business, financial condition, results of operations and cash flows.
If at any time the availability of these assets is limited or denied, and if access to alternative assets cannot be arranged, it could have an adverse effect on PAA’s business, results of operations and cash flow. Significant under-utilization of certain assets could significantly reduce PAA’s profitability due to fixed costs incurred to obtain the right to use such assets.
Certain of PAA’s business activities require the use or availability of third-party assets over which it may have little or no control. If at any time the availability of these assets is limited or denied, and if access to alternative assets cannot be arranged, it could have an adverse effect on PAA’s business, results of operations and cash flow.
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. 63 Table of Contents Index to Financial Statements If PAA were treated as a corporation for U.S. federal income tax purposes, it would pay U.S. federal income tax on its taxable income at the corporate tax rate and would likely pay state income taxes at varying rates.
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.
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. 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.
Violations of these licensing, tariff and tax reporting requirements could result in the imposition of significant administrative, civil and criminal penalties. Furthermore, Presidential Permits that allow cross-border movements of crude oil may be revoked or terminated at any time. PAA’s purchases and sales of crude oil, natural gas and NGL, and hedging activities, expose it to potential regulatory risks.
Furthermore, Presidential Permits that allow cross-border movements of crude oil may be revoked or terminated at any time. 61 Table of Contents Index to Financial Statements PAA’s purchases and sales of crude oil, natural gas and NGL, and hedging activities, expose it to potential regulatory risks.
The IRS Forms 1099-DIV that our shareholders receive from their brokers may over-report dividend income with respect to our shares for U.S. federal income tax purposes, which may result in a shareholder’s overpayment of tax.
This decline could result in our being subject to tax sooner than expected, our tax liability being greater than expected, or a greater portion of our distributions being treated as taxable dividends. 66 Table of Contents Index to Financial Statements The IRS Forms 1099-DIV that our shareholders receive from their brokers may over-report dividend income with respect to our shares for U.S. federal income tax purposes, which may result in a shareholder’s overpayment of tax.
If PAA fails to obtain materials or commodities in the quantity and the quality it needs, and at commercially acceptable prices, whether due to supply disruptions, inflation, tariffs, quotas or other factors, PAA’s results of operations, financial condition and cash flows could be materially and adversely affected.
Any loss of rights with respect to real property, through PAA’s inability to renew right-of-way contracts or otherwise, could have a material adverse effect on its business, results of operations, and financial position. 58 Table of Contents Index to Financial Statements If PAA fails to obtain materials or commodities in the quantity and the quality it needs, and at commercially acceptable prices, whether due to supply disruptions, inflation, tariffs, quotas or other factors, PAA’s results of operations, financial condition and cash flows could be materially and adversely affected.
However, the information that we provide to our shareholders may be inconsistent with the amounts reported by a broker on IRS Form 1099-DIV, and the IRS may disagree with any such information and may make audit adjustments to a shareholder’s tax return. 65 Table of Contents Index to Financial Statements For a non-U.S. holder of our shares, “dividends” for U.S. federal income tax purposes will be subject to withholding of U.S. federal income tax at a 30% rate (or such lower rate as specified by an applicable income tax treaty) unless the dividends are effectively connected with conduct of a U.S. trade or business.
For a non-U.S. holder of our shares, “dividends” for U.S. federal income tax purposes will be subject to withholding of U.S. federal income tax at a 30% rate (or such lower rate as specified by an applicable income tax treaty) unless the dividends are effectively connected with conduct of a U.S. trade or business.
The reimbursement of expenses and the payment of fees and expenses could adversely affect PAA’s ability to make distributions. PAA’s general partner has sole discretion to determine the amount of these expenses.
The reimbursement of expenses and the payment of fees and expenses could adversely affect PAA’s ability to make distributions. PAA’s general partner has sole discretion to determine the amount of these expenses. In addition, PAA’s general partner and its affiliates may provide PAA with services for which PAA will be charged reasonable fees as determined by its general partner.
A provincial authority could declare a pipeline to be a common carrier pipeline, and require PAA to change its rates, provide access to other shippers, or otherwise alter its terms of service.
A provincial authority could declare a pipeline to be a common carrier pipeline, and require PAA to change its rates, provide access to other shippers, or otherwise alter its terms of service. Any reduction in PAA’s tariff rates would result in lower revenue and cash flows. Some of PAA’s operations cross the U.S./Canada border and are subject to cross-border regulation.
We are unable to predict whether any changes or other proposals will ultimately be enacted. Any future legislative changes could negatively impact the value of our indirect investment in PAA.
We are unable to predict whether any changes or other proposals will ultimately be enacted.
PAA’s and its customers’ operations are subject to a number of risks arising out of the threat of climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy that could result in increased operating costs, limits on the areas in which oil and natural gas production may occur, and reduced demand for the crude oil and natural gas.
PAA’s and its customers’ operations are subject to a number of risks arising out of the threat of climate change, including the adoption of energy conservation measures, initiatives that stimulate demand for alternative forms of energy or limit production of petroleum products, or technological advances in fuel economy and energy generation devices.
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. 57 Table of Contents Index to Financial Statements Supply chain disruptions and inflation of prices for commodities, materials, products and shipping may make it more challenging to obtain sufficient quantities of high quality materials at acceptable prices and in a timely manner.
Supply chain disruptions and inflation of prices for commodities, materials, products and shipping may make it more challenging to obtain sufficient quantities of high quality materials at acceptable prices and in a timely manner.
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.
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.
While PAA’s consideration of changing climatic conditions and inclusion of safety factors in its design is intended to reduce the uncertainties that climate change and other events may potentially introduce, PAA’s ability to mitigate the adverse impacts of these events depends in part on the effectiveness of its facilities, particularly those located in coastal or flood prone areas, and its disaster preparedness and response and business continuity planning, which may not have considered or be prepared for every eventuality.
PAA’s ability to manage the adverse impacts of these events depends in part on the effectiveness its disaster preparedness and response and business continuity planning, which may not have considered or be prepared for every eventuality. The full impact of climate change on PAA’s business, as well as the businesses of its customers and suppliers is unknown.
Tax Risks As our only cash-generating assets consist of our partnership interest in AAP and its related direct and indirect interests in PAA, our tax risks are primarily derivative of the tax risks associated with an investment in PAA.
PAA’s obligations to the holders of PAA’s preferred units could also limit its ability to obtain additional financing or increase its borrowing costs, which could have an adverse effect on PAA’s financial condition. 64 Table of Contents Index to Financial Statements Tax Risks As our only cash-generating assets consist of our partnership interest in AAP and its related direct and indirect interests in PAA, our tax risks are primarily derivative of the tax risks associated with an investment in PAA.
PAA’s and its customers’ operations are subject to various risks arising out of the threat of climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy that could result in increased costs, limits on the areas in which oil and natural gas production may occur and reduced demand for PAA’s services.
Any of these could result in increased operating costs, limits on the areas in which oil and natural gas production may occur, and reduced demand for PAA’s services or the products it handles.
Risks Related to Laws and Regulations Impacting PAA’s Business PAA’s operations are subject to laws and regulations relating to protection of the environment (people, property and natural resources), operational safety, climate change and related matters that may expose it to significant costs and liabilities.
In turn, such limitations could lead to lower volumes of crude oil that PAA purchases in connection with its operations and reduced throughput on its pipelines and at its other facilities, which, depending on the impact to production growth, could have a material adverse effect on PAA’s financial position, results of operations and cash flows. 59 Table of Contents Index to Financial Statements Risks Related to Laws and Regulations Impacting PAA’s Business PAA’s operations are subject to laws and regulations relating to protection of the environment (people, property and natural resources), operational safety, climate change and related matters that may expose it to significant costs and liabilities.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” for additional discussion of our accounting policies and use of estimates associated with impairments. During the year ended December 31, 2022, PAA recognized non-cash impairment charges of approximately $330 million related to the write-down of certain long-lived crude oil assets in California.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” for additional discussion of our accounting policies and use of estimates associated with impairments. PAA is dependent on the use or availability of third-party assets for certain of its operations.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information required by this item is included in Note 19 to our Consolidated Financial Statements, and is incorporated herein by reference thereto. Item 4. Mine Safety Disclosures Not applicable. 66 Table of Contents Index to Financial Statements PART II
Biggest changeItem 3. Legal Proceedings The information required by this item is included in Note 18 to our Consolidated Financial Statements, and is incorporated herein by reference thereto. Item 4. Mine Safety Disclosures Not applicable. 68 Table of Contents Index to Financial Statements PART II

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, 2017 and that all distributions were reinvested on a quarterly basis. 67 Table of Contents Index to Financial Statements 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 PAGP $ 100.00 $ 96.52 $ 96.79 $ 47.26 $ 60.91 $ 80.21 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 AMNA $ 100.00 $ 86.71 $ 107.56 $ 82.43 $ 114.10 $ 138.67 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, 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.
See Note 18 to our Consolidated Financial Statements for additional information regarding our equity-indexed compensation plans. Our Class B shares and Class C shares are not listed or traded on any stock exchange.
See Note 17 to our Consolidated Financial Statements for additional information regarding our equity-indexed compensation plans. Our Class B shares and Class C shares are not listed or traded on any stock exchange.
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 2022 $ 0.2175 $ 0.2175 $ 0.2175 $ 0.2675 2021 $ 0.1800 $ 0.1800 $ 0.1800 $ 0.1800 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 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.
Our principal source of cash flow is derived from our indirect investment in PAA. As of December 31, 2022, we owned approximately 194.4 million AAP units, which represented an approximate 81% 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, 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.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” 68 Table of Contents Index to Financial Statements Our general partner owns a non-economic general partner interest in us, which does not entitle it to receive cash distributions. Item 6. Reserved
“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.
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, 2022, AAP owned approximately 241.0 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, 2023, AAP owned approximately 232.7 million 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 14, 2023, there were 194,407,642 Class A shares outstanding and approximately 55,000 record holders and beneficial owners (held in street name).
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).
Cash Distribution Policy Our partnership agreement requires that, within 55 days following the end of each quarter, we distribute all of our available cash to Class A shareholders of record on the applicable record date.
Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Cash Distribution Policy Our partnership agreement requires that, within 55 days following the end of each quarter, we distribute all of our available cash to Class A shareholders of record on the applicable record date.
Removed
Recent Sales of Unregistered Securities In connection with our IPO and related transactions, the Legacy Owners acquired the following interests (collectively, the “Stapled Interests”): (i) AAP units representing an economic limited partner interest in AAP; (ii) general partner units representing a non-economic membership interest in our general partner; and (iii) Class B shares representing a non-economic limited partner interest in us.
Removed
The Legacy Owners and any permitted transferees of their Stapled Interests have the right to exchange (the “Exchange Right”) all or a portion of such Stapled Interests for an equivalent number of Class A shares. In connection with the exercise of the Exchange Right, the Stapled Interests are transferred to us and the applicable Class B shares are canceled.
Removed
Although we issue one Class A share for each Stapled Interest that is exchanged, we also receive one AAP unit and one general partner unit. As a result, the exercise by Legacy Owners of the Exchange Right is not dilutive. During the three months ended December 31, 2022, Exchange Right exercises resulted in the issuance of 121,576 Class A shares.
Removed
The issuance of Class A shares in connection with the exercise of the Exchange Right was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof. Issuer Purchases of Equity Securities None.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur NGL operations are sensitive to weather-related demand, particularly during the approximate five-month peak heating season of November through March, and temperature differences from period-to-period may have a significant effect on NGL demand and thus our financial performance as well as the impact of comparative performance between financial reporting periods that bisect the five-month peak heating season. 79 Table of Contents Index to Financial Statements The following tables set forth our operating results from our NGL segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2022 2021 $ % Revenues $ 2,761 $ 1,968 $ 793 40 % Purchases and related costs (1,587) (1,324) (263) (20) % Field operating costs (312) (241) (71) (29) % Segment general and administrative expenses (2) (75) (71) (4) (6) % Adjustments (3) : Derivative activities (269) (19) (250) ** Long-term inventory costing adjustments (1) (27) 26 ** Foreign currency revaluation 1 (1) 2 ** Segment Adjusted EBITDA $ 518 $ 285 $ 233 82 % Maintenance capital $ 99 $ 68 $ 31 46 % Year Ended December 31, Variance Average Volumes (in thousands of barrels per day) (4) 2022 2021 Volumes % NGL fractionation 137 129 8 6 % NGL pipeline tariff 192 179 13 7 % Propane and butane sales (5) 94 110 (16) (15) % ** Indicates that variance as a percentage is not meaningful.
Biggest changeThe 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.
PAA’s assets and the services it provides are primarily focused on crude oil and NGL. Market Overview and Outlook Crude oil and other petroleum liquids are supplied to the global market by producers around the world, with the majority coming from the Organization of Petroleum Exporting Countries (“OPEC”), the Russian Federation and North American producers, among others.
PAA’s assets and the services it provides are primarily focused on crude oil and NGL. Market Overview and Outlook Crude oil and other petroleum liquids are supplied to the global market by producers around the world, with the majority coming from the Organization of Petroleum Exporting Countries (“OPEC”), North American producers and the Russian Federation, among others.
Performance Measures Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used to supplement related GAAP financial measures, (i) provide additional information about our core operating performance, (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions and (iii) present measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations.
Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used to supplement related GAAP financial measures, (i) provide additional information about our core operating performance, (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions and (iii) present measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations.
(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) 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.
Our primary cash requirements include, but are not limited to, (i) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, NGL and other products, other expenses and interest payments on outstanding debt, (ii) investment and maintenance capital activities, (iii) acquisitions of assets or businesses, (iv) repayment of principal on long-term debt and (v) distributions to our Class A shareholders and noncontrolling interests.
Our primary cash requirements include, but are not limited to, (i) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, NGL and other products, payment of other expenses and interest payments on outstanding debt, (ii) investment and maintenance capital activities, (iii) acquisitions of assets or businesses, (iv) repayment of principal on long-term debt and (v) distributions to our Class A shareholders and noncontrolling interests.
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 commercial paper program or credit facilities.
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.
With respect to a potential divestiture or acquisition, we may conduct an auction process or participate in an auction process conducted by a third party or we may negotiate a transaction with one or a limited number of potential buyers (in the case of a divestiture) or sellers (in the case of an acquisition).
With respect to a potential acquisition or divestiture, we may conduct an auction process or participate in an auction process conducted by a third party or we may negotiate a transaction with one or a limited number of potential sellers (in the case of an acquisition) or buyers (in the case of a divestiture).
These non-GAAP measures may exclude, for example, (i) charges for obligations that are expected to be settled with the issuance of equity instruments, (ii) 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, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and/or (v) other items that we believe should be excluded in understanding our core operating performance.
These non-GAAP financial performance measures may exclude, for example, (i) charges for obligations that are expected to be settled with the issuance of equity instruments, (ii) 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, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and/or (v) other items that we believe should be excluded in understanding our core operating performance.
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 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 (“Adjusted EBITDA attributable to noncontrolling interests in consolidated joint ventures”).
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”).
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, 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, 2023, 2022 and 2021, we did not record any charges related to the valuation adjustment of our inventory.
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 facilities-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, 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.
Adjusted EBITDA and Adjusted EBITDA attributable to PAA are reconciled to Net Income/(Loss), the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our Consolidated Financial Statements and accompanying notes.
Adjusted EBITDA and Adjusted EBITDA attributable to PAA are reconciled to Net Income, the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our Consolidated Financial Statements and accompanying notes.
We have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $740 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.
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.
See “—Executive Summary— Market Overview and Outlook” and Note 6, Note 9 and Note 10 to our Consolidated Financial Statements for additional information. Inventory Valuations. Inventory, including long-term inventory, primarily consists of crude oil and NGL and is valued at the lower of cost or net realizable value, with cost determined using an average cost method within specific inventory pools.
See “—Executive Summary— Market Overview and Outlook” and Note 6, Note 8 and Note 9 to our Consolidated Financial Statements for additional information. Inventory Valuations. Inventory, including long-term inventory, primarily consists of crude oil and NGL and is valued at the lower of cost or net realizable value, with cost determined using an average cost method within specific inventory pools.
The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability. 75 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 (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.
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, 2022.
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.
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 $16 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 $14 million.
Additionally, product sales revenues include the impact of gains and losses related to derivative instruments used to manage our exposure to commodity price risk associated with such sales and purchases. 71 Table of Contents Index to Financial Statements A majority of our sales and purchases are indexed to West Texas Intermediate (“WTI”).
Additionally, product sales revenues include the impact of gains and losses related to derivative instruments used to manage our exposure to commodity price risk associated with such sales and purchases. 73 Table of Contents Index to Financial Statements A majority of our sales and purchases are indexed to West Texas Intermediate (“WTI”).
(5) Includes volumes (attributable to our interest) from assets owned by unconsolidated entities. 77 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.
(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.
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 2021 to 2020 operating results and performance measures can be found in Item 7.
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.
The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability. See Note 13 to our Consolidated Financial Statements for additional information regarding the Preferred Distribution Rate Reset Option.
The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability. See Note 12 to our Consolidated Financial Statements for additional information regarding the Preferred Distribution Rate Reset Option.
“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, 2021 filed with the SEC on March 1, 2022.
“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.
It is against this macro backdrop that we expect to generate significant positive free cash flow on a multi-year basis, supported by our existing asset base and integrated business model.
It is against this macro energy market backdrop that we expect to generate significant positive free cash flow on a multi-year basis, supported by our existing asset base and integrated business model.
Therefore, our cash flow from operating activities may be impacted by the margin deposit requirements related to our derivative activities. See Note 13 to our Consolidated Financial Statements for a discussion regarding our derivatives and risk management activities.
Therefore, our cash flow from operating activities may be impacted by the margin deposit requirements related to our derivative activities. See Note 12 to our Consolidated Financial Statements for a discussion regarding our derivatives and risk management activities.
See Note 6 and Note 10 to our Consolidated Financial Statements for additional information on our property and equipment, intangible assets and depreciation and amortization expense. See Note 2 to our Consolidated Financial Statements for additional information on our asset retirement obligations. Impairment Assessments of Property and Equipment, Investments in Unconsolidated Entities and Intangible Assets.
See Note 6 and Note 9 to our Consolidated Financial Statements for additional information on our property and equipment, intangible assets and depreciation and amortization expense. See Note 2 to our Consolidated Financial Statements for additional information on our asset retirement obligations. Impairment Assessments of Property and Equipment, Investments in Unconsolidated Entities and Intangible Assets.
See Note 20 to our Consolidated Financial Statements for a reconciliation of Segment Adjusted EBITDA to Net income/(loss) attributable to PAGP. In connection with our merchant activities, our Crude Oil and NGL segments may enter into intersegment transactions for the purchase or sale of products, along with services such as the transportation, terminalling or storage of products.
See Note 19 to our Consolidated Financial Statements for a reconciliation of Segment Adjusted EBITDA to Net income attributable to PAGP. In connection with our merchant activities, our Crude Oil and NGL segments may enter into intersegment transactions for the purchase or sale of products, along with services such as the transportation, terminalling or storage of products.
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, 2022.
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.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 20 to our Consolidated Financial Statements for additional discussion of such adjustments.
(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.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 20 to our Consolidated Financial Statements for additional discussion of such adjustments.
(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.
We have filed with the SEC a shelf registration statement that, subject to effectiveness at the time of use, allows us to issue up to a specified amount of equity securities (“PAGP Traditional Shelf”). At December 31, 2022, we had approximately $939 million of unsold securities available under the PAGP Traditional Shelf.
Registration Statements PAGP Registration Statements. We have filed with the SEC a shelf registration statement that, subject to effectiveness at the time of use, allows us to issue up to a specified amount of equity securities (“PAGP Traditional Shelf”). At December 31, 2023, we had approximately $939 million of unsold securities available under the PAGP Traditional Shelf.
In November 2022, we and Enbridge Inc. (“Enbridge”) purchased Western Midstream Partners, LP (“WES”)’s 15% interest in Cactus II Pipeline, LLC (“Cactus II”) for an aggregate amount of $265 million. Enbridge acquired 10% and we acquired 5% of Cactus II, with each paying a proportionate share of the purchase price.
(“Enbridge”) purchased Western Midstream Partners, LP (“WES”)’s 15% interest in Cactus II Pipeline, LLC (“Cactus II”) for an aggregate amount of $265 million. Enbridge acquired 10% and we acquired 5% of Cactus II, with each paying a proportionate share of the purchase price.
(2) Represents pipeline projects with takeaway capacity out of the Permian Basin, including investments for our proportionate share of the projects of Wink to Webster Pipeline and Cactus II Pipeline. (3) Includes projects at our St. James, Cushing and Fort Saskatchewan terminals. Projected 2023 Capital Expenditures.
(2) Represents pipeline projects with takeaway capacity out of the Permian Basin, including investments for our proportionate share of the projects of Wink to Webster Pipeline and Cactus II Pipeline. (3) Includes projects at our St. James and Fort Saskatchewan terminals. Projected 2024 Capital Expenditures.
(3) For a more detailed discussion of these selected items impacting comparability, see the footnotes to the Segment Adjusted EBITDA Reconciliation table in Note 20 to our Consolidated Financial Statements. (4) The Preferred Distribution Rate Reset Option of PAA’s Series A preferred units is accounted for as an embedded derivative and recorded at fair value in our Consolidated Financial Statements.
(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.
None of these entities had debt outstanding as of December 31, 2022. 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, 2023. We may elect at any time to make additional capital contributions to any of these entities.
During 2022, PAA repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 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. On January 31, 2023, PAA redeemed its 2.85%, $400 million senior notes.
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.
At December 31, 2022 and 2021, we had outstanding letters of credit of approximately $102 million and $98 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, 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.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2018 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 2019 and the U.S.
See Note 11 to our Consolidated Financial Statements for additional information regarding our debt and related activities during the periods presented.
See Note 10 to our Consolidated Financial Statements for additional information regarding our debt and related activities during the periods presented.
The remaining available capacity under the Program as of December 31, 2022 was $198 million. 85 Table of Contents Index to Financial Statements Distributions to Our Class A Shareholders We distribute 100% of our available cash to our Class A shareholders of record within 55 days following the end of each quarter.
The remaining available capacity under the Program as of December 31, 2023 was $198 million. 86 Table of Contents Index to Financial Statements Distributions to Our Class A Shareholders We distribute 100% of our available cash to our Class A shareholders of record within 55 days following the end of each quarter.
In determining the existence of an impairment of carrying value, we make a number of subjective assumptions as to: • whether there is an event or circumstance that may be indicative of an impairment; • the grouping of assets; • the intention of “holding”, “abandoning” or “selling” an asset; 89 Table of Contents Index to Financial Statements • the forecast of undiscounted expected future cash flow over the asset’s estimated useful life; and • if an impairment exists, the fair value of the asset or asset group.
In determining the existence of an impairment of carrying value, we make a number of subjective assumptions as to: • whether there is an event or circumstance that may be indicative of an impairment; • the grouping of assets; • the intention of “holding”, “abandoning” or “selling” an asset; • the forecast of undiscounted expected future cash flow over the asset’s estimated useful life; and • if an impairment exists, the fair value of the asset or asset group.
As of December 31, 2022, we have recognized a long-term receivable of approximately $225 million for the portion of the release costs that we believe is probable of recovery from insurance, net of deductibles and amounts already collected. In the fourth quarter of 2022, insurers responsible for the majority of our remaining insurance coverage formally communicated a denial of coverage.
As of December 31, 2023, we have recognized a long-term receivable of approximately $225 million for the portion of the release costs that we believe is probable of recovery from insurance, net of deductibles and amounts already collected. Insurers responsible for the majority of our remaining insurance coverage have formally communicated a denial of coverage.
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, 2022, our sole cash-generating assets consisted of an approximate 81% limited partner interest in AAP through our ownership of approximately 194.4 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, 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.
Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2023: 69 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 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.
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. 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. 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.
Ongoing Activities Related to Strategic Transactions We are continuously engaged in the evaluation of potential transactions that support our current business strategy. In the past, such transactions have included the sale of non-core assets, the sale of partial interests in assets to strategic joint venture partners, acquisitions and large investment capital projects.
Ongoing Activities Related to Strategic Transactions We are continuously engaged in the evaluation of potential transactions that support our current business strategy. In the past, such transactions have included the acquisition of assets that complement our existing footprint, the sale of non-core assets, the sale of partial interests in assets to strategic joint venture partners, and large investment capital projects.
The distribution was paid to Class A shareholders of record as of January 31, 2023, with respect to the quarter ended December 31, 2022. See Note 12 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2022.
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.
See Note 7 and Note 9 to our Consolidated Financial Statements for additional information regarding these transactions.
See Note 7 and Note 8 to our Consolidated Financial Statements for additional information regarding these transactions.
The following table summarizes the proceeds received from divestitures during the last two years (in millions): Year Ended December 31, 2022 2021 Proceeds from divestitures (1) $ 60 $ 875 (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, 2023 2022 Proceeds from divestitures (1) $ 328 $ 60 (1) Represents proceeds, including working capital adjustments, net of transaction costs.
As of December 31, 2022, noncontrolling interests in our subsidiaries consisted of (i) limited partner interests in PAA including a 69% 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 19% 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, 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.
Gains/(Losses) on Investments in Unconsolidated Entities, Net During the fourth quarter of 2022, we recognized (i) a gain of $370 million associated with the remeasurement of our previously held 65% interest in Cactus II to fair value in connection with our acquisition of an additional 5% interest in Cactus II in November 2022 and (ii) a loss of $25 million associated with the difference between the fair value and historical book value of assets contributed by the Permian JV in exchange for an additional interest in OMOG.
During the fourth quarter of 2022, we recognized (i) a gain of $370 million associated with the remeasurement of our previously held 65% interest in Cactus II to fair value in connection with our acquisition of an additional 5% interest in Cactus II in November 2022 and (ii) a loss of $25 million associated with the difference between the fair value and historical book value of assets contributed by the Permian JV in exchange for an additional interest in OMOG.
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization, including write-downs related to cancelled projects and impairments, of unconsolidated entities), gains and losses on asset sales and asset impairments, goodwill impairment losses and gains or losses on and impairments of investments in unconsolidated entities, adjusted for certain selected items impacting comparability.
Performance Measures Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization (including our proportionate share of depreciation and amortization, including write-downs related to cancelled projects and impairments, of unconsolidated entities), gains and losses on asset sales and asset impairments and gains or losses on investments in unconsolidated entities, adjusted for certain selected items impacting comparability.
Gains/(Losses) on Asset Sales and Asset Impairments, Net The net losses on asset sales and asset impairments for 2022 primarily included (i) a $330 million non-cash impairment charge recognized in the fourth quarter of 2022 related to certain crude oil assets in California and (ii) gains recognized from the sale of land and related assets in Long Beach, California, as well as Line 901 and the Sisquoc to Pentland portion of Line 903, a portion of which relates to the transfer of an asset retirement obligation to the purchaser.
The net loss on asset sales and asset impairments for 2022 was primarily comprised of (i) a $330 million non-cash impairment charge recognized in the fourth quarter of 2022 related to certain crude oil assets in California, partially offset by (ii) gains recognized from the sale of land and related assets in Long Beach, California, as well as Line 901 and the Sisquoc to Pentland portion of Line 903, a portion of which relates to the transfer of an asset retirement obligation to the purchaser.
Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was approximately $2.4 billion and $2.0 billion, respectively, and primarily resulted from earnings from our operations.
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.
(7) Of this amount, approximately 1,073 and 1,038 thousand barrels per day were purchased in the Permian Basin for the years ended December 31, 2022 and 2021, respectively.
(7) Of this amount, approximately 1,147 and 1,073 thousand barrels per day were purchased in the Permian Basin for the years ended December 31, 2023 and 2022, respectively.
“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, 2023, we paid a quarterly distribution of $0.2675 per Class A share ($1.07 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, 2024, we paid a quarterly distribution of $0.3175 per Class A share ($1.27 per Class A share on an annualized basis).
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2022 2021 Investment capital (1) (2) (3) $ 334 $ 237 Maintenance capital (1) (3) 211 168 Acquisition capital (2) (4) 284 32 $ 829 $ 437 (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 interest, was 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, 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.
See Note 12 to our Consolidated Financial Statements for details of distributions paid to noncontrolling interests during the three years ended December 31, 2022. 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 $0.525 per unit ($2.10 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, 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).
AAP is a Delaware limited partnership that, as of December 31, 2022, directly owned a limited partner interest in PAA through its ownership of approximately 241.0 million PAA common units (approximately 31% PAA’s total outstanding common units and Series A preferred units combined).
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).
See Note 12 to our Consolidated Financial Statements for details of distributions paid during the three years ended December 31, 2022. Contingencies For a discussion of contingencies that may impact us, see Note 19 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, 2023. Contingencies For a discussion of contingencies that may impact us, see Note 18 to our Consolidated Financial Statements.
On February 14, 2023, PAA paid a quarterly distribution of $0.2675 per common unit ($1.07 per common unit on an annualized basis). The total distribution of $187 million was paid to common unitholders of record as of January 31, 2023, with respect to the quarter ended December 31, 2022.
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.
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 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 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.
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.
See Note 7 to our Consolidated Financial Statements for additional information.
See Note 7 to our Consolidated Financial Statements for additional information regarding this transaction.
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.
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.
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 2022 $ 71 $ 124 $ 94 2021 $ 48 $ 85 $ 68 Product sales revenues and purchases increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher prices in 2022.
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 summarizes our investment in capital projects (in millions): Year Ended December 31, Projects 2022 2021 Complementary Permian Basin Projects (1) $ 191 $ 73 Permian Basin Takeaway Pipeline Projects (2) 33 75 Selected Facilities/Downstream Projects (3) 28 41 Other Projects 82 48 Total $ 334 $ 237 83 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): 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.
As of December 31, 2022, although we had a working capital deficit of $535 million, we had approximately $3.0 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, 2022 Availability under PAA senior unsecured revolving credit facility (1) (2) $ 1,317 Availability under PAA senior secured hedged inventory facility (1) (2) 1,281 Amounts outstanding under PAA commercial paper program — Subtotal 2,598 Cash and cash equivalents (3) 381 Total $ 2,979 (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, 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.
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. 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.
Total investment capital for the year ending December 31, 2023 is currently projected to be approximately $420 million ($325 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets. Additionally, maintenance capital for 2023 is currently projected to be $205 million ($195 million net to our interest).
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.
Income Tax (Expense)/Benefit The net unfavorable income tax variance for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily a result of higher year-over-year income as impacted by fluctuations of the derivative mark-to-market valuations in our Canadian operations.
Income Tax (Expense)/Benefit The net favorable income tax variance for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to lower year-over-year income within our Canadian operations as impacted by fluctuations of derivative mark-to-market valuations.
Borrowings and Repayments Under Credit Arrangements 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, 2021, we had net repayments under the PAA credit facilities and commercial paper program of $712 million.
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.
See Note 6 and Note 7 to our Consolidated Financial Statements for additional information.
See Note 6 and Note 7 to our Consolidated Financial Statements for additional information regarding these asset sales and asset impairments.
These include PAA’s $1.35 billion senior unsecured revolving credit facility maturing in 2027, $1.35 billion senior secured hedged inventory facility maturing in 2025 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 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.
(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 of $33 million and $69 million, respectively. 81 Table of Contents Index to Financial Statements (3) Excludes restricted cash of $23 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.
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.” 74 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 2022 2021 $ % Net income $ 1,163 $ 600 $ 563 94 % Interest expense, net 405 425 (20) (5) % Income tax expense 246 112 134 120 % Depreciation and amortization 968 777 191 25 % (Gains)/losses on asset sales and asset impairments, net 269 592 (323) (55) % (Gains)/losses on investments in unconsolidated entities, net (346) (2) (344) ** Depreciation and amortization of unconsolidated entities (1) 85 123 (38) (31) % Unallocated general and administrative expenses (2) 5 6 (1) (17) % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments (280) (271) (9) ** Long-term inventory costing adjustments (4) (94) 90 ** Deficiencies under minimum volume commitments, net 7 (7) 14 ** Equity-indexed compensation expense 32 19 13 ** Foreign currency revaluation 4 (4) 8 ** Line 901 incident 95 15 80 ** Significant transaction-related expenses — 16 (16) ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (3) (146) (326) 180 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (4) 189 (14) 203 ** Foreign currency revaluation (5) 37 (3) 40 ** Selected Items Impacting Comparability - Adjusted EBITDA (6) 80 (343) 423 ** Adjusted EBITDA (6) $ 2,875 $ 2,290 $ 585 26 % Adjusted EBITDA attributable to noncontrolling interests in consolidated joint ventures (7) (365) (94) (271) (288) % Adjusted EBITDA attributable to PAA $ 2,510 $ 2,196 $ 314 14 % ** 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 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.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2022 compared to the year ended December 31, 2021. • Permian JV.
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.
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.
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.
PAA repurchased common units under the Program during the years ended December 31, 2022 and 2021 for a total purchase price of $74 million and $178 million, respectively, including commissions and fees.
There were no repurchases under the Program during the year ended December 31, 2023. PAA repurchased common units under the Program during the year ended December 31, 2022 for a total purchase price of $74 million, including commissions and fees.
In addition, we generally expect to fund our long-term needs, such as those resulting from investment capital activities or acquisitions and refinancing long-term debt, through a variety of sources (either separately or in combination), which may include the sources mentioned above as funding for short-term needs and/or the issuance of additional equity or debt securities and the sale of assets.
In addition, we generally expect to fund our long-term needs, such as those resulting from investment capital activities, acquisitions or refinancing long-term debt, through a variety of sources, which may include any or a combination of the sources listed above.
We expect to fund our 2023 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 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+3 added−4 removed8 unchanged
Biggest changeIn January 2023, we received notice that the Series A preferred unitholders elected the Preferred Distribution Rate Reset Option, which will be effective for the distribution paid in May 2023. See Note 12 to our Consolidated Financial Statements for additional information. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1.
Biggest changeSee 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.
Interest Rate Risk Our use of variable rate debt and any forecasted issuances of fixed rate debt expose us to interest rate risk. Therefore, from time to time, we use interest rate derivatives to hedge interest rate risk associated with anticipated interest payments and, in certain cases, outstanding debt instruments.
Our use of variable rate debt and any forecasted issuances of fixed rate debt expose us to interest rate risk. Therefore, from time to time, we use interest rate derivatives to hedge interest rate risk associated with anticipated interest payments and, in certain cases, outstanding debt instruments.
In the event of an actual 10% change in near-term commodity prices, the fair value of our derivative portfolio would typically change less than that shown in the table as changes in near-term prices are not typically mirrored in delivery months further out.
In the event of an actual 10% change in near-term commodity prices, the fair value of our derivative portfolio would typically change less than that shown in the table as changes in near-term prices are not typically mirrored in delivery months further out. Interest Rate Risk Debt .
The fair value of our interest rate derivatives was an asset of $120 million as of December 31, 2022. A 10% increase in the forward LIBOR curve as of December 31, 2022 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, 2023 would have resulted in an increase of $18 million to the fair value of our interest rate derivatives.
A 10% decrease in the forward LIBOR curve as of December 31, 2022 would have resulted in a decrease of $18 million to the fair value of our interest rate derivatives. See Note 13 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities.
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 .
Our objectives for these derivatives include hedging anticipated purchases and sales and stored inventory. We manage these exposures with various instruments including futures, forwards, swaps and options.
Our objectives for these derivatives include hedging anticipated purchases and sales and stored inventory. We manage these exposures with various instruments including futures, forwards, swaps and options. See Note 12 to our Consolidated Financial Statements for further discussion regarding our hedging strategies and objectives.
See Note 13 to our Consolidated Financial Statements for further discussion regarding our hedging strategies and objectives. 91 Table of Contents Index to Financial Statements The fair value of our commodity derivatives and the change in fair value as of December 31, 2022 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) $ (54) $ 55 Natural gas (1) $ 13 $ (13) NGL and other 225 $ (47) $ 47 Total fair value $ 222 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.
The 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.
All of PAA’s senior notes are fixed rate notes and thus are not subject to interest rate risk. We did not have any variable rate debt outstanding at December 31, 2022. The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2022 was 1.9%, based upon rates in effect during the year.
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.
Removed
Preferred Distribution Rate Reset Option The Preferred Distribution Rate Reset Option of PAA’s Series A preferred units is an embedded derivative that must be bifurcated from the related host contract, PAA’s partnership agreement, and recorded at fair value in our Consolidated Balance Sheets.
Added
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.
Removed
The valuation model utilized for this embedded derivative contains multiple inputs, including PAA’s common unit price, ten-year United States treasury rates, default probabilities and timing estimates to ultimately calculate the fair value of PAA’s Series A preferred units with and without the Preferred Distribution Rate Reset Option.
Added
Distributions on PAA’s Series B preferred units accumulate and are payable quarterly in arrears on the 15th day of February, May, August and November. Beginning August 15, 2023, distributions on PAA’s Series B preferred units accumulate based on the applicable three-month SOFR, plus certain adjustments.
Removed
The fair value of this embedded derivative was a liability of $189 million as of December 31, 2022. The ten-year U.S. Treasury rate as of December 31, 2022 was 3.88%. An increase in the ten-year U.S. Treasury rate curve of 10%, holding other inputs constant, would result in an increase in both expense and our liability of $33 million.
Added
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.
Removed
A decrease in the ten-year U.S. Treasury rate curve of 10%, holding other inputs constant, would result in a decrease in both expense and our liability of $39 million. See Note 13 to our Consolidated Financial Statements for a discussion of embedded derivatives.

Other PAGP 10-K year-over-year comparisons