BofA Securities has moved Plains GP Holdings, L.P. (PAGP) from a Neutral rating to Underperform and left its price objective unchanged at $19.00. The research house highlighted several structural and regulatory developments that, in its view, limit upside for the partnership and its related operating business.
The analyst who authored the note described a nuanced view of the Permian Basin: while being "extremely bullish" on Gas to Oil Ratio (GOR) expansion in the region, the firm expressed growing doubts about sustained long-term oil production growth. BofA projects Permian oil volumes will plateau and then begin to decline in the 2030s - a dynamic that would make a valuation re-rating of Plains All American Pipeline (PAA) more challenging.
Among the headwinds cited, BofA pointed to an overbuild of natural gas liquids (NGL) pipelines, which the firm says removes a potential "escape valve" for handling any crude overbuild. The note also highlighted a regulatory change in Federal Energy Regulatory Commission (FERC) policy - specifically lower FERC PPI adder rates - that reduces the potential benefit the company could receive from inflationary pass-throughs. The new guidance reflects a change from prior adders of +0.58% plus PPI to -1.42% plus PPI inflation beginning in mid-2026, according to the research note.
Those factors are central to BofA's earnings view. The firm models Plains All American Pipeline's Adjusted EBITDA remaining roughly flat at about $2.6 billion through the decade. Under that scenario, BofA calculates returns of roughly 9.7% if the company limits well-connect growth capital expenditures to $200 million, and closer to 8.7% if additional spending is required to expand the EPIC asset base.
BofA's downgrade comes against a backdrop in which PAA shares are trading near their 52-week high and technical indicators suggest overbought conditions. The disconnect between elevated share prices and a conservative medium-term earnings outlook informed the firm's decision to lower its view on the partnership's equity.
Separately, Plains All American reported solid third-quarter 2025 operating results. Net income attributable to the company reached $441 million, up from $220 million in the same quarter a year earlier. Adjusted EBITDA for the quarter was $669 million, a slight increase from $659 million in third-quarter 2024. The company also completed its acquisition of EPIC during this period, expanding its operational footprint.
Taken together, the research note and recent company results paint a mixed picture: near-term operational strength and strategic expansion are contrasted with a more constrained long-term growth and regulatory environment that, in BofA's view, limits upside potential for PAGP and PAA.
Additional context and implications
- BofA's rating change applies to the partnership security PAGP with the $19.00 price target preserved.
- The research highlights both commodity and infrastructure considerations - production trajectories and pipeline capacity - as determinants of future returns.
- Regulatory adjustments to FERC PPI adders are modeled to materially lower inflation-linked revenue upside beginning in mid-2026.