Plains All American Cuts Leverage After $3.3 Billion NGL Sale
Plains All American Pipeline (PAA) reported net income of $1.830 billion for the second quarter, swollen by a roughly $1.6 billion gain on the sale of its Canadian NGL business.
Plains All American Pipeline (PAA) reported second-quarter net income attributable to the partnership of $1.830 billion, up from $210 million a year earlier, after closing the sale of its Canadian NGL Business on May 12, 2024. The divestiture, worth roughly $3.3 billion in net cash proceeds and reported as a $3.483 billion net cash inflow in the quarter's cash flow statement, completed the pipeline operator's shift to a pure-play crude oil midstream company. Results now report the former NGL business as discontinued operations, a treatment absent from prior-quarter releases.
The sale reshaped the balance sheet more than it did operating income. Total debt fell to $8.441 billion at June 30 from $11.262 billion at year-end 2023, and long-term debt to total book capitalization improved to 43% from 52%. Plains funded roughly $2.9 billion of debt reduction with the proceeds, pulling its pro forma leverage ratio down to 3.3 times at quarter-end from 4.1 times at the end of the first quarter and toward the low end of its 3.25-to-3.75-times target range.
On a continuing-operations basis, adjusted EBITDA attributable to the partnership rose 10% year over year to $738 million from $672 million, and edged up sequentially from $730 million in the first quarter. Total adjusted EBITDA rose 8% to $879 million from $812 million. Adjusted net income attributable to PAA climbed 12% to $348 million from $312 million, and diluted adjusted net income per common unit rose 14% to $0.41 from $0.36. Revenue reached $17.693 billion, up 66% from $10.642 billion a year earlier, while operating income rose to $398 million from $239 million. Net cash from operating activities rose 38% year over year to $956 million and more than doubled sequentially from $418 million in the first quarter.
Crude oil remained the growth engine. Adjusted EBITDA from the Crude Oil segment rose 19% to $690 million from $580 million, helped by contributions from the Cactus III acquisition, higher pipeline volumes, and market optimization activity, partially offset by rate resets on Permian long-haul contracts. The NGL segment, now a shrinking piece of the portfolio ahead of full divestiture, saw adjusted EBITDA fall 54% to $40 million from $87 million as the Canadian business exited the reporting base. GAAP net income also carried a roughly $1.6 billion net gain on the divestiture, pushing discontinued-operations net income to $1,649 million from $70 million a year earlier. Second-quarter G&A expenses included a $34 million charge for accelerated costs tied to exiting the Canadian business.
Plains raised its 2024 organic growth capital guidance to a range of $400 million to $450 million from the $350 million level set at the start of the year, citing a new 75 Mb/d Cactus III pipeline expansion. Maintenance capital guidance was trimmed by $10 million to $175 million, largely reflecting the shortened ownership period of the NGL business, after that figure had itself been raised from an earlier level in the first quarter. The company also disclosed a $50 million Cactus III synergy target now captured in the second quarter, alongside $50 million of targeted cost reductions through year-end, updating the $100 million combined synergy and efficiency goal it had laid out for the full year in the first quarter.
The distribution held flat sequentially at $0.4175 a unit for the quarter, or $1.67 annualized, though the yield compressed to roughly 7% from about 7.5% in the first quarter as the unit price rose.