www.plainsallamerican.com NYSE: PAA & PAGP 1

2018 EIA Energy 

Conference

June 4, 2018
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Discussion Outline

 Brief Overview of Plains All American Pipeline

 High Level Takeaways

 U.S. Energy Environment – Perspectives on:

 Where we have been

 Where we are now

 Where we are going with respect to U.S. crude oil

 Contrasting “Then” vs “Now” (& Associated Challenges)

 NPC Current Activities
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Plains’ Current Profile

Plains Has One of the Largest and Most Integrated Crude Oil 

Midstream Systems in North America 

Note: Map contains only most significant PAA assets, including current projects and equity-investments assets.

 Volumes Handled(1):

 ~5.3 mmb/d Transportation

 ~1.4 mmb/d Supply & Logistics

 Total Enterprise Value: ~$31B(2)

 PAA Total Assets: ~$25B(3)

PAA’s Crude Oil Value Chain

(1) Average daily Transportation segment and Supply & Logistics segment volumes for the quarter ending 3/31/18.

(2) Based on closing unit prices as of 5/21/18.

(3) Based on balance sheet data as of 12/31/17.

Focus Points:

1. Highly integrated U.S. crude oil pipeline & 

terminal system

2. Leading crude oil midstream service provider in 

the Permian Basin

Legend
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PAA Crude Oil Fundamentals Group 

Staffed with +/- 8 dedicated analysts, engineers & professionals

 Primary objectives – understand and project:

 Future well & regional basin performance

 Quality related issues

 Regional supply / demand balances versus infrastructure capabilities

 Optimal pipeline & asset location and capacity requirements

 Actively monitor & track drilling & completion activities & production in key regions. 

 Maintain decline curves and performance analyses for each well drilled/completed in 

the Permian, Eagle Ford, Williston, DJ, PRB & STACK/Scoop (also Canadian resource plays)

 Tracking individual well performance, rates, cums, 

 Emulating economic returns & likely capital allocations by company

 Technological advances / setbacks; producer practices 

(single well versus pad; lateral length; sand volume, etc.)

 Also utilize 3rd party studies/analyses for other areas to augment our regional, U.S. & macro 

assessments as well as cross check our data /observations for key areas we track

 3rd party sources used for activities outside U.S. & Canada (IEA, EIA, OPEC, etc.)

 All data rolled up into macro assessment

 Major user of EIA weekly & monthly data & analyses to cross-check / calibrate with our 

assessments 
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Main Takeaways From This Presentation

 The U.S. has undergone a significant, positive transformation over 

the last +/- 40 years with respect to petroleum and natural gas

 Now is a great time to be in the energy business in the United 

States of America, ....

Note: Plains is primarily a crude oil focused entity, so the majority 

of detailed comments will focus on crude oil/petroleum

 ....but there are still challenges / hurdles to overcome and room 

for further improvement.
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U.S. Conditions in 1970s /Early 1980s

 Crude oil production peaked in 1970 (increasing our reliance on foreign imports)

 Lower 48 onshore decline would continue for ~35 years (thru 2005)

 Alaska production commenced in 1973 (production peaked in 1988)

 Federal waters production (OCS)commenced in 1981 (effectively peaked in 2002)

 Natural gas production peaked in 1971 

 Decline would continue for ~25 years (through 1996)

 Crude oil and natural gas subject to price controls

 MLP meant “maximum lawful price”

 Crude oil price controls removed 1981

 Natural gas price controls removed in stages mid-to-late 1980s

 Relatively fresh memories of gasoline rationing/waiting lines and the potential 

for a new “ice age” (global warming/climate change was not yet an issue)

 1980: +/- 250 refineries with average capacity of ~60kb/d

 Multiple “tea kettle” refineries (< 10kb/d)

 Crude oil infrastructure primarily owned by majors/integrated oil companies 

 Majority built in 1930s to 1950s
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So, if the future is so bright now, what changed?

 The U.S. energy industry addressed almost all of the challenges and overcame 

many of the obstacles that created those conditions.

 Selected contributing factors:

 Shift to market prices, open markets, futures market (crude 1983; nat gas 1990)

 American innovation, ingenuity and entrepreneurial spirit

 Re-discovery of “shale” & “resource” potential thru new technological lens

 Horizontal drilling & hydraulic fracturing

 Collaboration and teamwork

 Development of fiber optics 

 Advancements in computing technology

 Enhanced awareness of safety, environmental and social responsibility matters

 Capitalism at its best
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Reversing a 35 Year Production Decline; 

Outlook for Rising / Sustainable Production Profile

U.S. Crude Oil Production

(million barrels per day)

9.6

3.0

8.2

9.5

2.2

2.2

2.4 9.6

5.2

10.4

11.9

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

1970 2005 2018

ytd

2019P

L48 (x OCS) Alaska & OCS

 L48 oil production peaked in 1970 at 9.6 

mmb/d (full year avg)

 Likely to equal or exceed initial peak in 2020

 Alaskan oil production commenced 1973

 Peaked in 1988 at 2.0 mmb/d 

 Currently around 500 kb/d

 OCS production commenced 1981 

 Initially peaked at 1.6 mmb/d in 2002

 Currently averaging near peak levels over the 

last 18 months

 Expected to reach 1.9 mmb/d in 2019

 At current prices, activity levels and resource 

estimates, L48 production could increase an 

additional 3+ mmb/d by 2023 

Source: EIA & PAA estimates
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U.S. Reliance on Net Petroleum Imports Reduced 

From ~60% to Under 20% -- Potential to Approach 0%

U.S. Petroleum Consumption & Net Imports

(million barrels per day)

12.5

3.4

8.2 

17.1 

20.7 20.5

 -

 5.0

 10.0

 15.0

 20.0

 25.0

 -

 5.0

 10.0

 15.0

 20.0

 25.0

2005 2018 ytd

Net Petroleum Imports

Domestic suppply

 2005 – net imports totaled ~60% of total 

U.S. consumption

 2018 ytd – net imports total +/- 17% of 

total U.S. consumption

 Visibility for increased domestic 

production to reduce net imports to +/-

10% over next few years –

 Potential to approach 0% in the next 5 years

 Each 1 mmb/d reduction in net 

petroleum imports reduces the U.S. trade 

deficit by ~$24 billion/year

 Meaningfully greater impact on GDP 

Source: EIA & PAA estimates
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U.S. Refineries Today Relative to Early 1980s: 

~Half the Number; 15% More Capacity

U.S. Refinery

254 

137 

16.1 

18.6 

 10.0

 11.0

 12.0

 13.0

 14.0

 15.0

 16.0

 17.0

 18.0

 19.0

 20.0

 -

 50

 100

 150

 200

 250

 300

1982 Current

# refineries Capacity

 Rank among the best, most efficient and 

effective refineries in the world 

 Top of class in terms of environmental 

friendliness and safety for workforce and 

communities in which they reside.

 Access to competitively priced crude oil and 

NGL feedstock and low cost, abundant and 

reliable natural gas

 Since 2010, the U.S. has shifted from a net 

importer to a net exporter of refined 

products 

(million barrels 

per day)

# Operating 

refineries

Source: EIA & PAA estimates

Mb/d Refined Products 

Net Imports (Exports)

~135kb/d avg/refinery current versus ~60kb/d
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U.S. Has Become The World’s #1 Petroleum Liquids(1) Producer

Permian Basin: Largest U.S producing region

Source: EIA, BTU Analytics & PAA Estimates

(1) Liquids includes production of crude oil (including lease condensates), 

natural gas plant liquids, biofuels, other liquids, and refinery processing gains. 

 World Liquids Production: ~100 mmb/d as of April 2018

 As a standalone country, the Permian Basin would rank #7 among the world’s top 

liquids producers; expected to be the main driver for continued U.S. production growth
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Contrasting “Then” vs “Now”

(...and associated challenges)
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Notable Differences Between “Then” and “Now”

Short-Cycle vs Intermediate to Long-Cycle Projects

 1970s to Early 2000s:

 Primary industry efforts focused on large deep-water & frontier reserve targets 

 Involved significant exploration activities

 Multiple very expensive dry holes / uneconomic developments

 Long lead times between successful discoveries and first production

 Significant upfront capital, long production lives and high operating margins

 Attractive IRR with high ROI (...but, economics highly dependent on prices at 1st production)

 Current environment:

 Onshore projects with limited exploration activities; known productive areas & 

high success rates

 Primarily a development / manufacturing activity

 Short cycle economics

 Rapid production declines with high sustaining capital costs

 High IRR with modest ROI (able to respond quickly to changes in prices)

 Heightened recognition of the need to:

 operate in a safe and environmentally responsible manner & 

 embrace alternative energy sources as a fundamental need for our future
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High Decline, Short-Cycle Production Profile Requires High Reinvestment

Like Climbing Up A “Down Escalator” At Ever Increasing Speeds

Source: Drilling Info, PAA Estimates

Note: Charts are illustrative and represent a mathematical output resulting from various inputs and assumptions (not a production forecast)

1.0x

0.85x

0.70x

0.60x

0.50x

0.40x

0.30x

+/- 65% of 2017 Exit 

Rate Production 

Derived From Wells 

Completed in Prior 

24 months

Oil production (mb/d) Permian Basin Directional Illustration
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EIA Data Tracking Capabilities, Analyses & 

Publications Have Come A Long Way as Well

Publication Time Period Pages Frequency Cost

Monthly 

Energy 

Review

Jan 1980 112 Monthly $23 yr; 

Jan 1993 172 Monthly $71/yr

May 2018 245 Monthly Free on line

Short Term 

Energy 

Outlook

1Q1983 74 Quarterly $24/yr;

1Q1993 43 Quarterly $14/yr;

May 2018 46 Monthly Free on line

Now available on line, free of charge in various electronic formats 

along with extensive data bases, multiple analyses and dynamic 

modeling capabilities
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EIA – Collecting, Processing, Analyzing and Publishing Data Is 

Challenging, Never-Ending and Often Thankless Work

 Although not without variances and occasional revisions, the quality of the 

information is very good

 Examples of info published weekly include petroleum/crude oil:

 Production, consumption, imports, exports, refinery runs, inventory, etc.

 Reliant on multiple data sources of varying reliability

 The relative accuracy is impressive. Example:

 Comparison of real time weekly crude oil production estimates to monthly 

estimates based on more complete reports received from states on +/- 2 month lag

 ... and also requires continuous adaptation to changing conditions 

(e.g. horizontal vs vertical drilling; increasing API gravity, etc.)
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# Wells

Note: EIA data published May 14, 2018

Permian Basin Activity

Avg. ~125 DUCs / month 

over past 12 months

Source: EIA

 Variances in wells drilled vs wells completed adds to/decreases DUC inventory

 Most major basins currently averaging 6 to 9 months inventory

EIA Tracking of Drilled but Uncompleted Wells (“DUCs”)

Facilitates Forecasting Completion Activity Independent of Drilling Rig Count
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Midland Basin

mb/d

Source: Drilling Info, PAA Estimates

Note API Gravities: Condensate+ >50; Condensate 45-50; Light 35-45, Med 25-35, Heavy <25

Illustration of Changing Conditions: Crude Quality

Permian Basin Driving Increased Light Crude Production

Increasing Gravity Resulting in Additional Segregation Needs

Delaware Basin

Legend

Condensate+ >500

Condensate 450-500

Light 350-450

Medium 250-350

Heavy <250

PAA Pipelines
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The Crude Industry Is Constantly Changing / Adjusting 

Requires constant adjustments to data collection & analysis

 Examples of current / expected issues:

 Distinguishing wells drilled/completed between horizontal & vertical

 Age and orientation of DUC inventory (i.e. when drilled; vertical/horizontal)

 Tracking length of Hz laterals, volume of sand / water used in fracturing 

operations

 Impact of multi-well pad drilling, down spacing on infill wells, etc.

 Assessing the impact on forecasts of differing production practices 

(i.e. choking back wells vs open choke)

 Regional & inter-regional supply / demand balances (e.g. refinery capacity 

creep, takeaway capacity, etc.)

 Tracking the impact of increasing volumes of higher gravity crude oil on the 

common stream and related segregation needs and import/export 

influences
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Potential Challenges to The Near Term Production Outlook 

Key variables to monitor – Items Below are Specific to the Permian

 PAA believes frac capacity could limit 

completions in 2018

 Monitoring: timing of additional frac spreads

Gas Processing

Take-away 

Capacity

Frac Spreads

 Oil: PAA expects capacity constraints for 12-18 months (until new pipes online)

 NGL: sufficient planned capacity

 Residue Gas: Waha basis reflects expected tightness in 2018

 Dependent on Mexico demand

 Monitoring: timing of capacity expansions and new builds; impact of 

steel tariffs & quotas

 Planned capacity appears sufficient

 Monitoring: long lead-time equipment and GOR trends

Logistics

Labor

 Saltwater disposal (SWD): sufficient supply, 

monitoring permit challenges

 Fresh water: sufficient supply, 

monitoring sustainability 

 Frac Sand: sufficient supply, monitoring last-mile logistics

 Very tight market 

 Monitoring: quality and availability of labor

Source: PAA Estimates
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Conclusion

 The U.S. has undergone a significant, positive transformation over 

the last +/- 40 years with respect to petroleum and natural gas

 It is a great time to be in the energy business in the United States 

of America, ....

 ....but there are still challenges / hurdles to overcome and room 

for further improvement.

Many of these potential challenges / hurdles 

are the subject of studies currently being 

undertaken by the National Petroleum Council 
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NPC Current Activities
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National Petroleum Council (“NPC”) – Current Activities

 The sole purpose of the National Petroleum Council (NPC) is 

to advise the Secretary of Energy on issues relating to oil and 

natural gas. 

 The NPC only conducts studies in response to specific requests from 

the Secretary of Energy. 

 Secretary Perry has requested two studies, currently in 

process:

 Oil and Gas Transportation Infrastructure

 Carbon Capture Utilization And Storage (CCUS)
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Oil and Natural Gas Transportation Infrastructure Study

Excerpt from Secretary Perry’s request:
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Carbon Capture Utilization And Storage (CCUS)

Excerpt from Secretary Perry’s request:
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NPC Studies – Next Steps

 With NPC and DOE approvals, I will formally appoint 

Committees of Council members to prepare responses to the 

Secretary's requests

 Alan Armstrong, Williams, has agreed to Chair the 

Infrastructure Committee

 John Mingè, BP, has agreed to Chair the CCUS Committee

 Deputy Secretary Dan Brouillette will serve as Government CoChair of both Committees

 Committees will have Steering Committees, Subcommittees 

and Task Groups to conduct the studies and prepare reports –

100 to 200 participants on each effort

 Organizing, scoping and staffing are ongoing 

 Completion expected in 12 to 15 months
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Thanks to the EIA team and all those in attendance for all that you do 

to advance U.S. energy efforts.