Plains Gp (PAGP) Q2 Revenue Falls 17%

Key Points

• GAAP earnings per share and revenue for Q2 2025 fell short of analyst expectations. GAAP revenue declined 16.6% in Q2 2025 compared to Q2 2024.

• Crude oil pipeline volumes in the Permian Basin grew 7.8% compared to Q2 2024, but lower commodity prices offset these gains.

• The quarterly distribution per common unit increased 20% to $0.38.

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Plains Gp (NASDAQ:PAGP), a leading midstream energy company operating an expansive network of crude oil and natural gas liquids (NGL) pipelines and storage assets, reported its financial results on August 8, 2025. The earnings release highlighted that GAAP earnings per share (EPS) and revenue missed analyst expectations. Adjusted EPS came in at $0.36 versus a $0.39 consensus, and GAAP revenue totaled $10.64 billion against a $12.56 billion estimate, while adjusted EPS rose 16.1%. Despite some operational strengths, the quarter fell short of Street expectations, largely due to commodity price declines and softness in NGL margins. Management described their performance as advancing strategic priorities but acknowledged continued market volatility.

Source: Analyst estimates for the quarter provided by FactSet.

About Plains Gp and Recent Business Focus

Plains Gp is a major midstream energy infrastructure company. It owns and operates a vast system of crude oil and NGL pipelines, storage facilities, and related assets. Its primary operations are in key North American basins, with a substantial presence in the Permian Basin, one of the largest oil-producing regions globally.

The company's strategy focuses on capital discipline, portfolio optimization, and generating sustainable free cash flow. In recent years, it has emphasized monetizing selected assets, such as the pending sale of its Canadian NGL platform, while targeting bolt-on acquisitions to strengthen its Permian Basin footprint. The ability to maintain an investment-grade balance sheet and a reliable dividend are also key success factors.

Quarterly Highlights and Performance Drivers

During Q2 2025, Plains GP faced a 16.6% revenue decline and a 16% net income decline year over year. Total GAAP revenue dropped to $10.64 billion compared to $12.76 billion in Q2 2024. Adjusted free cash flow also declined by 15%, as higher investment spending and dividend payouts weighed on available cash. However, Adjusted EBITDA was $812 million, essentially flat compared to Q2 2024.

The crude oil segment remained a critical contributor. Crude oil adjusted EBITDA was $580 million, in line with Q2 2024 results. This was supported by an 8.1% increase in total crude oil pipeline volumes compared to Q2 2024. Gains from higher pipeline tariff volumes, tariff rate escalations, and contributions from recently acquired assets were largely offset by fewer market arbitrage opportunities and lower crude prices. Management specifically cited weaker price realization as a factor limiting income growth despite healthy throughput.

In the NGL segment, adjusted EBITDA decreased 7% year-over-year. The company pointed to lower “iso-to-normal butane spread” benefits, a reference to the price difference between two types of butane which directly affects NGL margins, specifically noting this as a driver of lower NGL segment results. NGL volumes were steady, but pricing and trading conditions were less favorable. Notably, Plains GP has reached an agreement to sell nearly all of its Canadian NGL business to Keyera Corp (TSX:KEY) for approximately $3.75 billion USD, with the transaction expected to close in Q1 2026 pending regulatory approval. Proceeds are earmarked for additional bolt-on acquisitions, preferred equity repurchases, and share repurchase opportunities.

Management also highlighted the company’s recent acquisition on July 22, 2025, of a 20% additional stake in the BridgeTex Pipeline, raising its ownership to 40%. This move is meant to enhance Plains Gp’s network coverage and service capabilities in the Permian Basin, supporting growth in one of its top-performing regions.

On the capital return front, the quarterly distribution per common unit was increased to $0.38, marking a 20% year-over-year gain. The distribution coverage ratio was healthy at 1.74x, though down marginally from the prior year. The company funds its dividend primarily from operating cash flow and aims to balance shareholder returns with prudent investment. The leverage ratio remained at the lower end of its targeted range, closing at 3.3x. Total debt (GAAP) increased to $8,682 million as of June 30, 2025, from $7,621 million as of December 31, 2024, as the company funded acquisitions and capital projects.

Looking Ahead: Guidance and Investor Considerations

Management reiterated its focus on capital discipline, selective M&A, and targeted distribution growth as its primary means of returning cash to shareholders. However, the first half’s weaker-than-expected adjusted free cash flow (non-GAAP) for the six months ended June 30, 2025 puts pressure on these targets.

Looking forward, the company will seek to complete the Canadian NGL sale, expected to close in Q1 2026, and redeploy proceeds into accretive bolt-on deals or share repurchases. Investors should watch for further updates around the closing of the NGL divestiture, trends in Permian Basin volume growth, commodity price swings, and the pace at which Plains Gp can replace divested earnings. Macro volatility, particularly in oil and NGL markets, remains an influential factor that can impact both revenues and profitability in upcoming periods.

The quarterly dividend was raised 20% to $0.38 per common unit.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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