4/A: PAA Executive Corrects Phantom Unit Grant

Plains All American Pipeline LP's EVP, General Counsel & Secretary, Richard K. McGee, filed an amended Form 4 to correct an over-reported acquisition of 10,000 phantom units.

Summary

• Richard K. McGee, EVP, General Counsel & Secretary of Plains All American Pipeline LP (PAA), filed an amended Form 4 to correct an error in a previously reported acquisition of phantom units.
• The original Form 4, filed on August 18, 2025, inadvertently reported the acquisition of 10,000 more phantom units than actually granted.
• The corrected number of phantom units acquired on August 14, 2025, is 112,650.
• These phantom units were granted under a Long-Term Incentive Plan and include distribution equivalent rights (DERs) payable in cash.
• One common unit is deliverable upon vesting for each phantom unit that vests.
• The phantom units vest in three tranches, primarily on the August 2028 distribution date, subject to continued service and performance conditions.

Sentiment

Score: 5

Explanation: The filing is an administrative correction of a previously reported insider transaction, which is neutral in sentiment. The underlying grant itself is a positive for executive alignment but is not the primary focus of this amendment.

Positives

• The grant of 112,650 phantom units aligns executive compensation with long-term company performance and shareholder returns.
• Performance-based vesting conditions (TSR relative to peers and cumulative distributable cash flow per common unit equivalent) incentivize strong operational and financial results.

Negatives

• An administrative error led to an over-reporting of 10,000 phantom units in the original filing, requiring an amendment.

Risks

• The vesting of Tranche 2 (28,162 phantom units) is contingent on PAA's total shareholder return (TSR) over a three-year period ending June 30, 2028, compared to a selected peer group, with payout ranging from 0% to 200%.
• The vesting of Tranche 3 (28,163 phantom units) is contingent on PAA achieving cumulative distributable cash flow (DCF) per common unit equivalent (CUE) of $8.40 over the three-year period ending June 30, 2028, with payout ranging from 0% to 200%.
• Payouts for Tranche 2 and Tranche 3 are subject to reduction based on negative actual TSR or PAA's leverage ratio exceeding a target range, respectively.

Future Outlook

The future outlook for the reporting person's compensation is tied to the vesting of phantom units, which are contingent on continued service through August 2028 and the achievement of specific company performance targets related to Total Shareholder Return (TSR) and cumulative Distributable Cash Flow (DCF) per Common Unit Equivalent (CUE) by June 30, 2028.

Industry Context

This filing pertains to an executive compensation grant within Plains All American Pipeline LP, a major player in the midstream energy sector. The use of performance-based phantom units, tied to metrics like TSR and DCF, is a common practice in the industry to align executive incentives with long-term shareholder value creation and operational efficiency.

Comparison to Industry Standards

• The structure of the long-term incentive plan, utilizing phantom units with both time-based and performance-based vesting, is consistent with common executive compensation practices in the midstream energy sector.
• Tying a portion of executive compensation to Total Shareholder Return (TSR) relative to a peer group is a standard approach to ensure competitive performance and alignment with market expectations, similar to practices seen in companies like Enterprise Products Partners L.P. or Kinder Morgan, Inc.
• The inclusion of Distributable Cash Flow (DCF) per Common Unit Equivalent (CUE) as a performance metric is highly relevant for master limited partnerships (MLPs) like PAA, as DCF is a key indicator of an MLP's ability to generate cash for distributions, a metric often emphasized by investors in this segment.

Stakeholder Impact

• Shareholders: The correction ensures accurate reporting of executive compensation. The performance-based vesting aligns executive incentives with shareholder value creation through TSR and DCF targets.
• Employees: The filing specifically relates to a grant for a key executive, Richard K. McGee, and does not directly impact the broader employee base, though it reflects the company's long-term incentive philosophy.

Next Steps

• Continued service by Richard K. McGee through August 2028 for Tranche 1 vesting.
• PAA's performance relative to its peer group's Total Shareholder Return (TSR) over the three-year period ending June 30, 2028, will determine Tranche 2 payout.
• PAA's achievement of cumulative Distributable Cash Flow (DCF) per Common Unit Equivalent (CUE) of $8.40 over the three-year period ending June 30, 2028, will determine Tranche 3 payout.
• Cash payment of Tranche 1 DERs in a lump sum on the August 2026 distribution date, followed by quarterly payments starting November 2026.
• Cash payment of Tranches 2 and 3 DERs in a lump sum on the August 2028 distribution date for any vested units.

Key Dates

Keywords

PAA, Plains All American Pipeline, SEC Form 4, Insider Transaction, Executive Compensation, Phantom Units, Equity Grant, Long-Term Incentive Plan, Richard K. McGee, Corporate Governance