Plains All American to Sell Canadian NGL Business to Keyera for $3.75B

Plains All American Pipeline, L.P. PAA and Plains GP Holdings PAGP, (collectively, Plains) have entered into a definitive agreement to sell the majority of their Canadian Natural Gas Liquids (“NGL”) business to Keyera Corp. for nearly $3.75 billion (CAD $5.15 billion).  Subject to necessary approval, this transaction is expected to close in the first half of 2026.

Per the transaction, Plains will divest its Canadian NGL business but retain substantially all NGL assets in the United States and all crude oil assets in Canada. The deal will increase Plains’ focus on crude oil transportation for its customers.

After tax payment and one-time special distribution of 35 cents to unitholders, the net proceeds from this transaction will be nearly $3 billion. Plains intends to utilize the remaining proceeds for strategic acquisitions, preferred unit repurchases and potential common unit buybacks.

How Will Plains Gain From This Divestiture?

The transaction transforms Plains into a focused, growth-oriented crude oil midstream company, reinforcing its position as an industry leader. By exiting the Canadian NGL business, Plains reduces its exposure to commodity volatility and seasonal fluctuations, resulting in more stable cash flow.

The deal, valued at roughly 13 times expected 2025 Distributable Cash Flow, underscores its strong financial merit. With lower capital and tax demands, the streamlined business is set to generate increased excess cash flow. This move also enhances Plains’ financial flexibility, supporting efficient capital deployment and continued execution of its disciplined long-term strategy.

Long-Term Growth of the Oil and Gas Pipeline Industry

Per a report from Straits Research, the global oil and gas pipeline market will reach from $26.5 billion in 2023 to $44.01 billion in 2032. Per the firm, rising energy consumption is being fueled by growing demand for oil and gas, driven by factors such as population growth, urbanization and expanding industrial activity.

The above projection indicates that there is ample opportunity for the expansion of Plains’ operations over the long term.

Midstream Operations Are Capital Intensive and Complex

Midstream operations, including pipelines, storage facilities and processing plants, can be capital-intensive and operationally challenging. These operations, at times, divert the focus and resources of the energy companies from higher-margin upstream or downstream segments. Exploration and Production companies that have midstream operations divest midstream assets to focus on their core business.

Last year, Permian Resources PR, an independent oil and natural gas company, entered into a definitive agreement to sell its natural gas and oil gathering systems primarily located in Reeves County, TX, to Kinetik Holdings Inc. KNTK for a total cash consideration of $180 million. 

Permian Resources decided to divest its non-core midstream operations to concentrate on the core exploration and production operations in the Delaware Basin.

PAA’s Price Performance

In the past six months, Plains All American's units have gained 9% against its industry’s decline of 3%.

PAA’s Zacks Rank

Plains All American currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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