Plains GP Holdings Business Model

Introduction

Plains GP Holdings, LP (PAGP), an MLP with a difference. If you have read my article on Kinder Morgan, Inc. (KMI) then you know how I feel about companies that operate pipelines and other energy assets as master limited partnerships or MLPs.

Plains GP Holdings (NYSE: PAGP) is a publicly traded master limited partnership (MLP) with a few differences that makes it different from other MLPs.

Plains GP Holdings (NYSE: PAGP) is a publicly traded master limited partnership (MLP) with a few differences that makes it different from other MLPs. First, Plains GP Holdings is a pipeline business and not an oil and gas exploration and production company like most MLPs. Second, Plain GP Holdings is a pure play pipeline business while most MLPs offer energy-related services such as oil field services, equipment leasing and drilling services. Thirdly, Plains GP Holdings is large in size compared to other MLPs with approximately $22 billion in total assets under management as of January 31st 2019 which represents about 20% of the total market cap for all publicly traded oil & gas infrastructure companies listed on U.S exchanges at the time of writing this article

Other than the fact that it is not a pure play pipeline business, which may prove more stable and stronger than most MLPs, Plains GP Holdings consists of three separate entities.

You may be wondering why Plains GP Holdings is different than a pure play pipeline business. It’s true, Plains GP Holdings is not a pure play pipeline company; however, it does have three separate entities that make up the total business model. These include the following:

• Plains All American Pipeline (PAA)
• PAA Enterprises LLC (PAE) and its subsidiaries
• PAA Midstream Partners LP (PAAP).

It owns approximately 80% of Plains All American Pipeline, LP (Plains), the largest pipeline in North America. In the first nine months of 2013, the partnership processed over 16 billion cubic feet per day of natural gas and transported over 20 million barrels per day of natural gas liquids (NGLs) and crude oil in its pipelines.

Plains GP Holdings owns approximately 80% of Plains All American Pipeline, LP (Plains), the largest pipeline in North America. In the first nine months of 2013, the partnership processed over 16 billion cubic feet per day of natural gas and transported over 20 million barrels per day of natural gas liquids (NGLs) and crude oil in its pipelines.

Plains GP Holdings business model is to own a majority interest in Plains, which operates a large network of pipelines that transport crude oil, NGLs and natural gas from various production areas to refineries, petrochemical facilities or export terminals. Plains also provides transportation services for third parties on its pipelines through its Marketing Services segment.

It also owns a 36% interest in Western Midstream Partners, LP (WES), which was formed by Anadarko Petroleum Corporation to operate gathering, processing and transportation assets in the Uinta Basin in Utah and the Pinedale Anticline and Jonah fields in southwestern Wyoming. The partnership expects WES’ adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) will be between $150 million to $250 million for 2013.

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Conclusion

After all that, it really comes down to whether or not you’re willing to take the risk of investing in PAGP. It’s certainly a riskier investment than many other MLPs, but it also offers the opportunity for solid gains. I would recommend doing your homework before making any financial decisions and not taking risks you aren’t prepared to pay for.