Plains Is Seeing Some Modest Benefits From Higher Permian Volumes

We believe the returns from Plains All American's pipeline network have been materially negatively impacted by the oversupply of Permian oil takeaway capacity, which we expect to persist for years. In a bit of a setback, Plains will see higher Permian volumes in 2022, but the financial benefit will be more muted, as the volumes are moving from fully owned assets to joint-venture assets, meaning Plains will only see a fraction of the earned tariffs. As a result, improved operating leverage from higher Permian volumes is essentially shelved until 2023. Still, Plains is pursuing a balanced capital allocation approach, including a "no regrets" growth capital investment framework, a 21% distribution increase, a continued focus on debt reduction, and unit buybacks with the remainder of excess cash flow.