Upgrade to Neutral on More Constructive Macro

Goldman Sachs has upgraded PAA/PAGP to Neutral from Sell, raising the price target to $24. The upgrade reflects a constructive crude macro outlook, a simplified portfolio post-Canada NGL sale, and increased probability of the company being an M&A target.

Key Takeaways

• 1.Goldman Sachs upgraded Plains All American (PAA/PAGP) to Neutral from Sell due to an improved crude oil macro environment and portfolio streamlining.
• 2.The divestiture of Canadian NGL assets for $3.3 billion simplifies the company's structure and reduces earnings volatility.
• 3.PAA is now viewed as a potential M&A candidate (ranked 2/Medium probability) given its focused Permian-centric crude portfolio.

Table of Contents

• Upgrade to Neutral
• Point 1: More constructive macro outlook supports better EBITDA growth, albeit still more modest vs. peers.
• Point 2: The Canada NGL sale lowers earnings volatility and streamlines the portfolio.
• Point 3: Solid FCF profile, though continued B/S focus vs. material unitholder returns upside.
• Point 4: Potentially becoming an M&A candidate
• GS M&A Framework
• Valuation and Risks
• Disclosure Appendix