Re: Plains Gp Holdings LP (PAGP) - Part 2
Discuss the value proposition of PAGP vs DVN/CTRA vs KMI vs WMB vs SOBO
( Analysis done by Claud AI including CAGR calculations w/ my Buys I uploaded to Claude)
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Quick Comparison:
DVN (Post-Merger)
- Current Price: ~$44
- P/E: ~10x (TTM)
- FCF Yield: ~13-14% (at $70 WTI post-synergies)
- Dividend Yield: 3% (increasing to $1.26/share post-merger)
- Expected CAGR: Mid-single digits with $5B+ buyback program
PAGP
- Current Price: ~$19
- P/E: ~25x (TTM), ~10-12x forward
- FCF Yield: Not applicable (midstream fee-based model)
- Dividend Yield: 8.1-8.3%
- Expected CAGR: Low single digits (2-4%)
Key Differences:
DVN is commodity-exposed growth. The merger unlocks $1B in annual synergies by 2027, generates $4B+ discretionary FCF post-dividend, and provides 13-14% FCF yield at $70 oil. You're betting on oil prices, Permian production durability, and synergy execution. P/E of 10x is cheap for 550k boe/d with 10+ years of sub-$40 inventory.
PAGP is pure infrastructure income. You're getting 8.3% qualified dividends with minimal commodity exposure—volumes drive revenue, not prices. The EPIC acquisition adds operating leverage, but growth is capped at 2-4% annually. P/E looks high at 25x TTM, but forward is 10-12x once NGL sale completes and debt normalizes.
Which fits your portfolio better?
If you want growth + dividends and can handle oil price volatility: DVN wins. FCF yield of 13% crushes PAGP's 8% dividend, and you get equity upside if oil stays above $65.
If you want pure yield with stability: PAGP wins. Qualified dividends at 8.3%, minimal price volatility, and fee-based cash flows that don't crater when oil drops to $50.
My take: DVN is better value if you believe oil averages $65-75 for 3+ years. PAGP is better for pure income with less drama. At current prices, DVN offers 60% more cash yield (13% vs 8%) with optionality on oil. But PAGP sleeps better at night.
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Pipeline Comparison:
Metric______PAGP____________KMI_____WMB___________SOBO| Price | ~$19 | ~$30 | ~$60 | ~$27 USD | | P/E Ratio | 25x TTM, 10-12x fwd | 22x | 30x | 17x | | Div Yield | 8.3% | 3.9% | 3.3% | 7.4% | | Leverage | 3.8x (temp) ? 3.5x | 2.5x | High | Moderate | | Credit | BB+ | BBB+ | Investment grade | Not rated | | Growth | 2-4% | 3-5% | 4-6% | Low single digit | | Geography | Permian-focused | Diversified | Gas-focused | Canada?US crude |
Quick Takes:
SOBO = Closest Comp to PAGP
- Both are pure-play crude pipelines with 7%+ yields
- Both have elevated payout ratios (SOBO at 130%, PAGP at 75%)
- SOBO is Canadian tar sands?US Gulf Coast; PAGP is Permian?Corpus
- SOBO trades at 17x P/E vs PAGP's 25x—cheaper valuation
- SOBO yield of 7.4% is slightly lower than PAGP's 8.3%, but payout is riskier
KMI = Gold Standard
- Investment-grade credit, 2.5x leverage, diversified assets
- Lower yield (3.9%) but safest dividend in the group
- 22x P/E is reasonable for quality and stability
- Natural gas infrastructure exposure (70%+ of EBITDA)
- Your existing position—stick with it as core holding
WMB = Natural Gas Pure-Play
- Highest quality gas infrastructure (Transco pipeline)
- Lowest yield (3.3%) reflects premium valuation
- 30x P/E is expensive—paying for growth optionality
- Best positioned for LNG export demand growth
- Not a value play—this is a quality/growth premium
PAGP vs SOBO (The Real Decision):
PAGP wins on:
- Lower leverage (3.5x target vs SOBO's higher ratio)
- EPIC acquisition creates operating synergies SOBO lacks
- US-based qualified dividends (simpler tax treatment)
- Corpus Christi export advantage
SOBO wins on:
- Cheaper valuation (17x vs 25x P/E)
- Established cash flows (no integration risk)
- Canadian energy infrastructure remains undervalued
- Payout ratio concern is offset by contracted revenues
My Take: If you want pure yield with less hair, SOBO at 17x P/E and 7.4% yield is better value than PAGP. But SOBO's 130% payout ratio is unsustainable—they're either cutting or refinancing debt. PAGP's 75% payout is healthier.
Bottom line: PAGP and SOBO are close cousins. SOBO is cheaper today, but PAGP has better optionality. KMI remains your safest midstream hold. WMB is too expensive for pure income.
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My portfolio results:
WMB trading at $67/share near an All Time High (23.1% CAGR includes dividends for the 16 year period based on my first buy in 2009 and 4 buys in 2020) avg cost $9.84/share.
KMI trading at $30.05/share ( 22.93 % CAGR includes dividends from a buy starting in 12/2018 and 7 Buys in 2020) avg cost $11.87/share.
SOBO trading at $29.18/share ( 36.92% CAGR but only 9 months w/ 6 Buys 4/2025 ) avg cost $23.74/share.
Summary Table| Ticker | Primary Status (2025/2026) | Tax Paperwork | Key Action | | WMB | Mixed (Qualified + ROC) | 1099-DIV | Reduce basis for the ROC portion. | | KMI | Qualified | 1099-DIV | Pay capital gains rate on full amount. | | SOBO | Qualified | 1099-DIV | Watch for Canadian withholding tax. |
I will pass on PAGP. I have been peeling off shares of WMB & KMI but still have over sized positions. SOBO ia a long term hold and can use my Foreign Tax credit for any Canadian witholdings. The recent addition of DVN/CTRA worked out extremely well:
DVN $43.97 w/ avg cost (including CTRA shares converted) $32/share. 82.79% CAGR based on my combined DVN ( 11 DVN Buys in 2025 & 1 Buy in 2026 & 1 CTRA Buy 9/2025); that CAGR includes dividends paid. I plan to hold this for years and the dividends are "qualified". Let's see where the CAGR comes in after 5 years & after 10 years. I suspect it will be close to 23% similar to WMB & KMI.
Summary of Energy Portfolio Tax Status| Stock | Dividend Type | Tax Rate (Federal) | | DVN | Qualified | 0%, 15\%, or 20% | | CTRA | Qualified | 0%, 15\%, or 20% | | WMB | Mixed | Qualified + Return of Capital (ROC) | | KMI | Qualified | 0%, 15\%, or 20% | | SOBO | Qualified | 0%, 15\%, or 20% (Minus 15% Canadian Withholding) |
Note: KMI in earlier years had ROC. I also have WMB in the ROTH that is not included in the above CAGR results. |
