Form 4: Plains All American Pipeline LP: Executive Chris Herbold Reports Changes in Beneficial Ownership

Chris Herbold, Sr. VP Finance & CAO of Plains All American Pipeline LP, reports the vesting and disposal of common units and the acquisition of phantom units.

Summary

• On August 14, 2024, Chris Herbold, Sr. VP Finance & CAO of Plains All American Pipeline LP, reported changes in beneficial ownership.
• 96,264 common units were acquired through vesting and then disposed of.
• Additionally, 35,359 common units were disposed of at a price of $17.05.
• Following these transactions, Herbold directly owns 198,561 common units.
• Herbold also acquired 32,400 phantom units on August 15, 2024, which vest in August 2027 based on service, total shareholder return (TSR), and distributable cash flow (DCF) per common unit equivalent (CUE).
• Distribution equivalent rights (DERs) are associated with these phantom units and will be paid in cash.

Sentiment

Score: 7

Explanation: The document reflects standard executive compensation practices and equity ownership adjustments. The sentiment is neutral to slightly positive, as the equity awards align management with shareholder interests.

Positives

• The granting of phantom units aligns executive compensation with long-term company performance, specifically TSR and DCF/CUE.

Risks

• The vesting of Tranche 2 and 3 phantom units is contingent on achieving specific TSR and DCF/CUE targets, which may not be met.
• The payout for Tranche 3 phantom units is subject to reduction if the company's leverage ratio exceeds the target range.

Future Outlook

The vesting of phantom units in August 2027 is contingent on continued service and the achievement of specific TSR and DCF/CUE targets over the three-year period ending June 30, 2027.

Industry Context

Executive compensation packages often include equity-based awards like phantom units to align management's interests with those of shareholders, incentivizing long-term value creation. The use of TSR and DCF/CUE as performance metrics is common in the energy sector.

Comparison to Industry Standards

• Many companies in the energy sector, such as Enterprise Products Partners (EPD) and Kinder Morgan (KMI), utilize similar long-term incentive plans that include performance-based equity awards.
• The specific TSR and DCF/CUE targets are tailored to Plains All American Pipeline's financial goals and strategic objectives.
• The vesting schedules and performance metrics are generally in line with industry practices for executive compensation.

Stakeholder Impact

• Shareholders: The equity-based compensation aligns management's interests with shareholder value creation.
• Employees: The long-term incentive plan can motivate employees to contribute to the company's success.
• Management: The vesting of phantom units provides a financial incentive for achieving performance targets.

Next Steps

• Continued monitoring of PAA's TSR and DCF/CUE performance to assess the potential vesting of the phantom units in August 2027.

Key Dates