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PAA’s General Partner Also Agrees to Modify IDRs

Plains All American Pipeline, L.P. (NYSE:PAA) today announced that it has received binding commitments for the purchase of approximately $1.5 billion of equity capital. The purchasers will acquire approximately 56 million units of a newly authorized series of 8% Perpetual Series A Convertible Preferred Units (the “Preferred Units”) at a price of $26.25 per unit. The Preferred Units will bear an annual distribution of $2.10 per unit. After two years, the Preferred Units are convertible at the purchasers’ option into PAA common units on a one for one basis (subject to customary anti-dilution adjustments), and are convertible at PAA’s option in certain circumstances after three years. Closing of the transaction is scheduled to occur prior to the end of January 2016.

The net proceeds, after deducting offering expenses and including the general partner’s proportionate 2% equity contribution, are approximately $1.5 billion. PAA expects to use the proceeds for capital expenditures, repayment of debt, and general partnership purposes. The primary purchasers include affiliates of EnCap Investments L.P., EnCap Flatrock Midstream, The Energy Minerals Group, Kayne Anderson Capital Advisors, L.P., and First Reserve Advisors, L.L.C.

In connection with this transaction, PAA’s general partner agreed to modify its incentive distribution rights (“IDRs”). As a result of this modification, when the Preferred Units convert into PAA common units, the IDRs associated with the resulting common units will only participate in distribution growth above PAA’s current distribution level of $2.80 per converted common unit. Assuming all Preferred Units convert into PAA common units, the modification represents a permanent IDR reduction of approximately $90 million per year.

“We believe this transaction is extremely positive for PAA and all of its stakeholders,” said Greg Armstrong, Chairman and Chief Executive Officer. “This ‘one and done’ transaction enables PAA to accomplish a number of objectives, including:

  • Immediately strengthen PAA’s balance sheet and liquidity;
  • Reinforce PAA’s commitment to maintaining mid-to-high BBB and Baa credit ratings and fund its capital program in a very debt friendly manner;
  • Satisfy PAA’s equity financing needs for all of 2016 and, in all material respects, all of 2017;
  • Address concerns about PAA’s ability to sustain its distribution;
  • Resolve investor concerns about PAA’s need to routinely access equity capital markets; and
  • Substantially insulate PAA from further capital market disruptions.”

In a separate release, PAA also announced a quarterly cash distribution of $0.70 per limited partner unit ($2.80 per unit on an annualized basis), and Plains GP Holdings (NYSE:PAGP) announced a quarterly cash distribution of $0.231 per Class A share ($0.924 per Class A share on an annualized basis). Both distributions are unchanged from the quarterly distributions paid in November 2015.

PAA will conduct a conference call on Tuesday, January 12, 2016 to discuss the Preferred Unit transaction and PAA’s outlook for 2016 and beyond. The conference call will be held at 10:00 a.m. ET (9:00 a.m. CT).

Conference Call Access Instructions

Access to the live conference call is available by dialing toll free (800) 230-1085. International callers should dial (612) 288-0329. No password is required. To access the slide presentation accompanying the conference call, please go towww.plainsallamerican.com, navigate to “Investor Relations,” select “PAA,” then “News & Events,” and then “Conference Calls.” The slide presentation will be available a few minutes prior to the call at the above referenced website.

Telephonic Replay Instructions

To listen to a telephonic replay of the conference call, please dial (800) 475-6701, or (320) 365-3844 for international callers, and enter replay access code 383873. The replay will be available beginning Tuesday, January 12, 2016, at approximately 12:30 p.m. ET and will continue until 12:59 a.m. ET on February 12, 2016.

The securities offered in the private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements of the Securities Act and applicable state laws.

This press release is neither an offer to sell nor a solicitation of an offer to purchase the securities described herein.

Plains All American Pipeline, L.P. is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids (“NGL”), natural gas and refined products. PAA owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada. On average, PAA handles over 4.4 million barrels per day of crude oil and NGL in its Transportation segment. PAA is headquartered in Houston, Texas.

Plains GP Holdings, L.P. is a publicly traded entity that owns an interest in the general partner and incentive distribution rights of Plains All American Pipeline, L.P., one of the largest energy infrastructure and logistics companies in North America. PAGP is headquartered in Houston, Texas.