Plains All American Pipeline, L.P. (NYSE: PAA) and Plains GP Holdings (NYSE: PAGP) today reported second-quarter 2020 results and furnished updated 2020 guidance.

Summary

Reported net income for the period of $142 million

Delivered second-quarter 2020 Adjusted EBITDA of $524 million

Updated full-year 2020 Adjusted EBITDA guidance to $2.5 billion (increase of $75 million, or 3%)

Reduced 2020 / 2021 expansion capital program to $1.45 billion (incremental reduction of $100 million, or 6%)

'We delivered second-quarter results slightly favorable to our expectations and raised our guidance for the year,' stated Willie Chiang, Chairman and CEO of Plains. 'We continue to focus on increasing free cash flow and improving our financial positioning, while protecting the health and safety of our team members, streamlining and optimizing our business, and lowering capital expenditures and costs in all areas. Today we announced a further $100 million reduction of our capital program, supplementing the significant capital reductions we announced in April. Despite meaningful uncertainty in the current environment, we are confident that we are taking the appropriate actions to position our business for the long-term.'

Second-quarter 2020 Transportation Segment Adjusted EBITDA decreased 16% versus comparable 2019 results, due to reductions in tariff volumes in multiple regions resulting from lower crude oil prices, production shut-ins, and tighter regional basis differentials during the quarter. Our Permian long-haul movements were the most notably impacted, a portion of which were minimum volume commitment deficiencies and will be made up and / or paid for in future periods.

Second-quarter 2020 Facilities Segment Adjusted EBITDA increased 1% versus comparable 2019 results primarily due to operational cost savings and increased capacity at certain of our Mid-Continent and Gulf Coast crude oil storage terminals, partially offset by the impact of asset sales.

Second-quarter 2020 Supply and Logistics Segment Adjusted EBITDA decreased by 99% versus comparable 2019 results due to less favorable crude oil differentials in both the Permian Basin and Canada, partially offset by the benefit of contango-based margin opportunities.

Non-GAAP Financial Measures and Selected Items Impacting Comparability

To supplement our financial information presented in accordance with GAAP, management uses additional measures known as 'non-GAAP financial measures' in its evaluation of past performance and prospects for the future and to assess the amount of cash that is available for distributions, debt repayments and other general partnership purposes.

The primary additional measures used by management are earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization of unconsolidated entities), gains and losses on asset sales and asset impairments, goodwill impairment losses and gains on and impairments of investments in unconsolidated entities, adjusted for certain selected items impacting comparability ('Adjusted EBITDA'), Implied distributable cash flow ('DCF'), Free Cash Flow and Free Cash Flow After Distributions.

Performance Measures

Management believes that the presentation of Adjusted EBITDA and Implied DCF 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 and ability to fund distributions to our unitholders through cash generated by our operations and (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions. We also present these and additional non-GAAP financial measures, including adjusted net income attributable to PAA and basic and diluted adjusted net income per common unit, as they are measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations. 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 related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and business outlook and/or (v) other items that we believe should be excluded in understanding our core operating performance. These measures may further be adjusted to include amounts related to deficiencies associated with minimum volume commitments whereby we have billed the counterparties for their deficiency obligation and such amounts are recognized as deferred revenue in 'Other current liabilities' on our Condensed Consolidated Financial Statements. Such amounts are presented net of applicable amounts subsequently recognized into revenue.

Furthermore, the calculation of these measures contemplates tax effects as a separate reconciling item, where applicable. We have defined all such items as 'selected items impacting comparability.' Due to the nature of the selected items, certain selected items impacting comparability may impact certain non-GAAP financial measures, referred to as adjusted results, but not impact other non-GAAP financial measures. We do not necessarily consider all of our selected items impacting comparability to be non-recurring, infrequent or unusual, but we believe that an understanding of these selected items impacting comparability is material to the evaluation of our operating results and prospects.

Although we present selected items impacting comparability that management considers in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, expansion projects and numerous other factors. These types of variations may not be separately identified in this release, but will be discussed, as applicable, in management's discussion and analysis of operating results in our Quarterly Report on Form 10-Q.

Liquidity Measures

Management also uses the non-GAAP financial measures Free Cash Flow and Free Cash Flow After Distributions to assess the amount of cash that is available for distributions, debt repayments and other general partnership purposes. Free Cash Flow is defined as Net Cash Provided by Operating Activities, less Net Cash Used in Investing Activities, which primarily includes acquisition, expansion and maintenance capital expenditures, investments in unconsolidated entities and the impact from the purchase and sale of linefill and base gas, net of proceeds from the sales of assets and further impacted by distributions to, contributions from and proceeds from the sale of noncontrolling interests. Free Cash Flow is further reduced by cash distributions paid to preferred and common unitholders to arrive at Free Cash Flow After Distributions.

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