Form 4: PAA Executive McGee's Equity Transactions

Plains All American Pipeline LP's EVP, General Counsel & Secretary, Richard K. McGee, reported routine equity transactions including the exercise of phantom units and a new performance-based grant.

Summary

• Richard K. McGee, EVP, General Counsel & Secretary of Plains All American Pipeline LP (PAA), reported equity transactions on August 14, 2025.
• Exercised 176,731 phantom units, converting them into common units at a price of $0.
• Disposed of 69,544 common units at $17.78 per unit to cover tax withholding obligations.
• Following these transactions, beneficial ownership stands at 606,353 common units.
• Received a new grant of 122,650 phantom units under the Long-Term Incentive Plan.
• The new phantom units vest in three tranches on the August 2028 distribution date.
• Tranche 1 (56,325 units) is service-based.
• Tranche 2 (28,162 units) is performance-based, tied to PAA's Total Shareholder Return (TSR) relative to a peer group over three years ending June 30, 2028, with a payout range of 0% to 200%.
• Tranche 3 (28,163 units) is performance-based, tied to PAA achieving cumulative distributable cash flow (DCF) per common unit equivalent (CUE) of $8.40 over three years ending June 30, 2028, with a payout range of 0% to 200%.

Sentiment

Score: 6

Explanation: Neutral to slightly positive. This is a routine executive compensation filing. The positive aspect is the alignment of executive incentives with company performance through performance-based equity grants, which is generally viewed favorably for corporate governance and long-term value creation. The negative is the tax-related sale, which is standard.

Positives

• The grant of new performance-based phantom units aligns executive incentives directly with shareholder value creation and key financial metrics like Total Shareholder Return (TSR) and Distributable Cash Flow (DCF).
• The exercise of phantom units by a key executive demonstrates conversion of long-term incentives into direct equity ownership, potentially signaling confidence.

Negatives

• The disposal of 69,544 common units for tax withholding purposes reduces the executive's direct beneficial ownership, although this is a standard practice for equity compensation.

Risks

• The vesting of Tranches 2 and 3 of the new phantom unit grant is subject to PAA's performance against specific metrics (TSR relative to peers and cumulative DCF per CUE), introducing uncertainty regarding the final number of units that will vest.
• Payouts for performance-based tranches can range from 0% to 200%, indicating significant variability in the executive's potential compensation.
• Tranche 2 payout is subject to reduction if PAA's actual TSR is negative.
• Tranche 3 payout is subject to reduction if PAA's leverage ratio as of June 30, 2028, exceeds the upper end of its non-rating agency target leverage ratio range.

Future Outlook

The future outlook for Richard K. McGee's compensation is tied to the performance of Plains All American Pipeline LP through August 2028. A significant portion of the new phantom unit grant is performance-based, contingent on the company's Total Shareholder Return relative to peers and its cumulative Distributable Cash Flow per Common Unit Equivalent. Distribution Equivalent Rights will accrue and be paid in cash, with Tranche 1 DERs starting quarterly payments in November 2026 and Tranches 2 and 3 DERs paid in a lump sum upon vesting in August 2028.

Management Comments

• Phantom Units granted under Long-Term Incentive Plan (includes distribution equivalent rights payable in cash).
• One common unit is deliverable, upon vesting, for each Phantom Unit that vests.
• These phantom units will vest as follows: (a) Tranche 1, consisting of 56,325 phantom units, will vest on the August 2028 distribution date assuming continued service through such date; (b) Tranche 2, consisting of 28,162 phantom units (assuming 100% payout at target), will potentially vest on the August 2028 distribution date at a scaled payout range of between 0% to 200% based on PAA's total shareholder return (TSR) over the three-year period ending June 30, 2028 compared to the TSR of a selected peer group...; and (c) Tranche 3, consisting of 28,163 phantom units (assuming 100% payout at target), will potentially vest on the Aug. 2028 distribution date at a scaled payout range of between 0% and 200% based on PAA achieving cumul. distributable cash flow (DCF) per common unit equivalent (CUE) of $8.40 over the 3-year period ending 6/30/28...

Industry Context

This Form 4 filing reflects a common practice in the energy midstream sector, where executive compensation often includes long-term incentive plans tied to equity and performance metrics. The use of phantom units, Total Shareholder Return (TSR) relative to peers, and Distributable Cash Flow (DCF) targets are standard mechanisms to align executive interests with long-term company performance and shareholder value in capital-intensive industries like pipelines.

Comparison to Industry Standards

• The structure of the long-term incentive plan, utilizing phantom units with service-based and performance-based vesting, is consistent with executive compensation practices observed across major midstream companies such as Enterprise Products Partners L.P. (EPD) or Kinder Morgan, Inc. (KMI).
• Tying performance-based vesting to Total Shareholder Return (TSR) relative to a peer group is a widely adopted benchmark for executive compensation, ensuring alignment with competitive market performance.
• The inclusion of Distributable Cash Flow (DCF) per common unit equivalent as a performance metric is particularly relevant for Master Limited Partnerships (MLPs) like PAA, as DCF is a key indicator of an MLP's ability to generate cash for distributions, similar to how it's used by Magellan Midstream Partners, L.P. (MMP) or Energy Transfer LP (ET).
• The specified payout range of 0% to 200% for performance-based units is a common incentive structure designed to reward exceptional performance while penalizing underperformance.
• The use of a leverage ratio as a potential payout reduction factor for DCF-based awards is a prudent risk management feature, encouraging financial discipline, a practice also seen in some large-cap energy infrastructure firms.

Corporate Governance

Stakeholder Impact

• Shareholders: The performance-based nature of the new phantom unit grant aligns executive incentives with shareholder interests, potentially leading to improved company performance and value. However, the vesting of these units could result in future dilution.
• Employees: The filing pertains to executive compensation and does not directly impact the broader employee base, though it reflects the company's overall compensation philosophy.

Next Steps

• Continued service by Richard K. McGee to meet service-based vesting conditions.
• PAA's operational and financial performance will be monitored against Total Shareholder Return (TSR) and cumulative Distributable Cash Flow (DCF) targets through June 30, 2028, to determine the vesting of performance-based phantom units.
• Cash payments of Distribution Equivalent Rights (DERs) for Tranche 1 phantom units will commence quarterly in November 2026.
• Lump sum cash payments for DERs associated with vested Tranches 2 and 3 phantom units are expected on the August 2028 distribution date.

Key Dates

Keywords

Plains All American Pipeline, PAA, SEC Form 4, Richard K. McGee, executive compensation, phantom units, common units, equity grant, long-term incentive plan, TSR, DCF, distributable cash flow, total shareholder return, executive stock ownership