Form 4: Plains All American Pipeline LP: Executive Vice President and CFO Al Swanson Reports Changes in Beneficial Ownership

Al Swanson, EVP & CFO of Plains All American Pipeline LP, reports acquisition and disposal of common units and phantom units.

Summary

• On August 14, 2024, Al Swanson, EVP & CFO of Plains All American Pipeline LP, reported changes in beneficial ownership.
• Swanson acquired 167,378 common units at $0 and disposed of 65,864 common units at $17.05.
• Following these transactions, Swanson directly owns 494,714 common units.
• Swanson also reported the vesting of 167,378 phantom units on August 14, 2024, and the acquisition of 108,000 phantom units on August 15, 2024.
• The newly acquired phantom units will vest in August 2027, contingent on continued service and the company's total shareholder return (TSR) and distributable cash flow (DCF) per common unit equivalent (CUE) performance.

Sentiment

Score: 6

Explanation: The document primarily reports transactions related to executive compensation. The vesting conditions tied to performance metrics are generally positive, but the potential reduction based on leverage ratio introduces a slight negative aspect.

Positives

• The acquisition of phantom units incentivizes management to improve company performance, as vesting is tied to TSR and DCF/CUE metrics.

Risks

• Vesting of Tranche 3 phantom units is subject to reduction if PAA's leverage ratio exceeds the upper end of its target range, potentially disincentivizing management if the leverage ratio is exceeded.

Future Outlook

The vesting of phantom units in August 2027 is contingent on the company's performance relative to TSR, DCF/CUE, and leverage ratio targets.

Industry Context

Executive compensation often includes equity-based awards like phantom units to align management's interests with those of shareholders. The vesting conditions based on TSR and DCF/CUE are common practices in the energy industry.

Comparison to Industry Standards

• Companies like Enterprise Products Partners (EPD) and Magellan Midstream Partners (MMP) also utilize long-term incentive plans with performance-based vesting conditions.
• TSR and DCF metrics are frequently used in the midstream sector to incentivize growth and profitability.
• Leverage ratio conditions are also common to ensure financial discipline.

Stakeholder Impact

• The vesting of phantom units based on TSR and DCF/CUE aims to align management's interests with those of shareholders, potentially leading to increased shareholder value.
• Employees may be indirectly impacted by the company's focus on achieving the performance targets required for phantom unit vesting.

Key Dates