Plains GP Holdings, L.P. (NASDAQ: PAGP) and its subsidiary Plains All American Pipeline, L.P. (NASDAQ: PAA) reported fourth-quarter 2025 financial results on February 6, 2026, marking a pivotal shift toward a crude oil pure-play strategy. While the partnership delivered a year-over-year increase in adjusted EBITDA for the quarter, total 2025 revenue and net cash flow reflected the impact of significant acquisition activity and segment volatility.
Following the announcement, shares of Plains GP Holdings experienced volatility as investors assessed a 10% distribution increase against a backdrop of a $1.22 billion net cash outflow in the final quarter.
Strategic Portfolio Realignment
The primary development in the fourth quarter was the partnership’s aggressive pivot to streamline operations. Central to this strategy is the $3.2 billion divestiture of the natural gas liquids (NGL) business, expected to close by the end of the first quarter of 2026. The proceeds are earmarked for deleveraging and a potential one-time special distribution of $0.15 per unit or less to offset tax liabilities.
Simultaneously, the company integrated the Cactus III acquisition, which contributed approximately $45 million to the Crude Oil segment’s adjusted EBITDA in just two months of ownership.
Financial and Operational Performance Data
For the fourth quarter and full year 2025, the partnership reported the following key metrics:
Adjusted EBITDA (Attributable to PAA): $738 million for Q4, bringing the full-year total to $2.83 billion.
Crude Oil Segment EBITDA: Increased to $611 million in Q4 from $593 million in Q3, driven by bolt-on contributions and higher tariff volumes.
NGL Segment EBITDA: Rose seasonally to $122 million in Q4 but declined year-over-year due to lower frac spreads and reduced sales volumes from warmer weather.
Net Cash Provided by Operating Activities: $2.94 billion for the full year 2025, compared to $2.49 billion in 2024.
Adjusted Free Cash Flow (excl. changes in Assets & Liabilities): Negative $821 million for the full year, primarily due to $3.77 billion in net cash used for investing activities.
Efficiency Initiatives and 2026 Outlook
Plains has initiated a multi-year “self-help” program targeting $100 million in annual savings through 2027. This effort includes closing regional offices and reducing general and administrative (G&A) costs, with roughly 50% of these savings projected for realization in 2026.
For fiscal year 2026, the company provided the following guidance:
Adjusted EBITDA Target: $2.75 billion (within a range of +/- $75 million).
Distributable Cash Flow: Projected at $1.85 billion.
Capital Expenditures: Growth capital of $350 million and maintenance capital of $165 million.
Distribution Growth: Targeted annual growth of $0.15 per unit until reaching a 150% common unit coverage ratio.
Executive Commentary and Capital Strategy
“The NGL sale serves as a catalyst to streamline our broader organization,” stated Willie Chiang, Chairman and CEO, during the earnings presentation. Management highlighted that the post-divestiture focus on crude oil would result in higher quality, more durable cash flows and reduced commodity exposure.
Chief Financial Officer, Tom Stewart, noted that the partnership’s leverage ratio stood at 3.9x as of December 31, 2025. However, following the close of the NGL sale, the company expects its long-term leverage ratio to return to its target range of 3.25x to 3.75x.
Broader Sector and Macro Context
Plains remains heavily concentrated in the Permian Basin, where it expects pipeline volumes to reach 8 million barrels per day (Mb/d) in 2026. This assumes a relatively flat production environment with WTI prices averaging between $60 and $65 per barrel.
As the midstream sector consolidates, Plains is positioning itself as a pure-play infrastructure operator, moving away from more volatile marketing and NGL fractionation businesses to secure its investment-grade credit profile, currently rated BBB by S&P and Fitch.
Reasons to Pass on PAGP
- Negative free cash flow: Adjusted free cash flow was negative $821 million in 2025 due to heavy investment spending.
- Large quarterly cash outflow: The partnership recorded a $1.22 billion net cash outflow in the fourth quarter.
- High capital intensity: Investing cash outflows totaled $3.77 billion for the year, increasing funding and execution risk.
- Leverage above target: Leverage stood at 3.9x at year-end, with improvement dependent on the NGL divestiture closing as planned.
- Asset sale execution risk: The $3.2 billion NGL divestiture introduces timing, pricing, and reinvestment uncertainty.
- Greater business concentration: The shift to a crude oil pure-play increases reliance on a single segment and basin.
- NGL earnings volatility: NGL segment EBITDA declined year over year amid weaker frac spreads and weather impacts.
- Permian exposure risk: Volume growth assumptions depend on stable Permian production and oil prices.
- Delayed cost savings: Only about half of the targeted $100 million in annual savings is expected to be realized in 2026.
- Distribution growth conditional: Planned distribution increases hinge on successful deleveraging and coverage improvement.