“We are committed to further strengthening our balance sheet, reducing leverage, and further enhancing our financial flexibility for the benefit of all of our stakeholders,” stated Al Swanson, Executive Vice President and CFO of Plains All American. “Importantly, we ended the first quarter with approximately US$2.5 billion of committed liquidity and no near-term needs to access either the debt or equity capital markets. We continue to actively monitor the current environment and intend to address forward guidance and related matters on our first-quarter earnings conference call in May.”
Total expansion capital for 2020/2021 is now targeted to be approximately US$1.55 billion, or US$750 million (33%) lower than the previously targeted US$2.3 billion capital programme, and US$1.35 billion (47%) lower when eliminating US$600 million of assumed JV project financing (net to Plains) for the Red Oak project, which has been deferred. The balance of the capital reductions relate to cancelations, cost savings and scope adjustments to other capital projects. First quarter 2020 expansion capital expenditures are estimated to be approximately US$350 million. The Partnership will continue to work closely with customers and industry partners to optimise, defer and potentially further reduce the capital program, subject to producer activity levels on Plains system.
Acknowledging the uncertain duration of current and anticipated industry challenges and to further reinforce PAA’s commitment to maintaining a solid capital structure and strong liquidity, Plains’ Board of Directors has approved a distribution of US$0.18 per PAA common unit and PAGP Class A share for the first quarter of 2020. These distributions represent a 50% reduction relative to distributions paid in February 2020 and equate to an annualized distribution rate of US$0.72 per PAA common unit and corresponding PAGP Class A share versus its previous annualized level of US$1.44 per PAA common unit / PAGP Class A share.
With respect to PAA’s Series A Preferred Units, PAA announced a quarterly cash distribution of US$0.525 per Series A Preferred Unit, or US$2.10 on an annualised basis. For its Series B Preferred Units, PAA announced a semi-annual distribution of US$30.625 per Series B Preferred Unit. All distributions (attributable to common units, Class A shares and Preferred Units) will be payable on 15 May 2020 to holders of record at the close of business on 1 May 2020.
Regarding the asset sales program, the Partnership closed an incremental sale on 1 April, which generated proceeds of US$165 million and brings year-to-date proceeds to approximately US$245 million. An additional US$195 million asset sale remains under definitive agreement and is expected to close later in the year. Plains is continuing its efforts to advance additional asset sales opportunities.
The Partnership noted that the PAGP cash distribution is expected to be a non-taxable return of capital to the extent of a Class A Shareholder’s tax basis in each PAGP Class A Share and a reduction in the tax basis of that Class A Share. To the extent any cash distribution exceeds a Class A Shareholder’s tax basis, it should be taxable as capital gains.
