Plains Faces a Weak Oil Volumes Recovery Across Its Assets

We believe the oversupply of Permian oil takeaway capacity, which we expect to persist for years, had a material negative impact on the returns from Plains All American's pipeline network. The crude oil business is now a lower-for-longer story. Plains signed contracts for its Permian long-haul pipeline portfolio that extended the duration of its contracts to 2028 with rates consistent with $1.25-$1.50 a barrel. Factoring in the lower contracted rates and expected volume increases over the next few years, with 2024 Permian volumes expected to increase about 200,000-300,000 barrels per day, this essentially places 2026 EBITDA flat with 2024 at $2.2 billion. We think this outcome speaks to the no-moat nature of the Plains portfolio and its lack of pricing power amid a severe Permian oversupply of long-haul pipeline infrastructure. We don’t expect much, if any, improvement until around 2030.