On May 8, 2013, the units of Plains All American Pipeline, L.P. (PAA) climbed to its 52-week high of $59.17 primarily driven by robust performance in first-quarter 2013. The partnership’s top and bottom line surpassed both the Zacks Consensus Estimates as well as the year-ago results. Improvement in performance was mainly due to strong contribution from the fee-based Transportation and Facilities segments, and proper implementation in the margin-based Supply and Logistics segment.
Recently, Plains All American Pipeline completed acquisition of natural gas liquids (NGL) assets from a subsidiary of BP plc (BP). The partnership has already experienced positive impact from the acquisition. Transportation and Facilities segments’ outperformance has primarily fuelled from the addition of these NGL assets. We believe this acquisition will boost Plains All American Pipeline’s midstream business in the future through addition of pipelines, storage capacity, fractionation plants and supply contracts.
Plains All American Pipeline intends to invest additional $300 million in 2013 for several projects, including Mississippian Lime pipeline, Rainbow 2 pipeline and Gardendale Gathering System projects. This additional investment will drive the capital expenditure to $1.4 billion.
Apart from investment in growth projects, Plains All American Pipeline’s stable financial position also allows it to improve unitholders’ value through regular cash distribution payments.
Recently, the board of directors of Plains All American Pipeline increased its quarterly cash distribution by 2.2% sequentially and 10% year over year to 57.50 cents per unit on all of its outstanding limited partner units. The partnership’s practice of raising cash distributions from time to time will benefit the stock as it attracts investor attention.
Plains All American Pipeline’s full-year 2013 adjusted earnings before interest, tax, depreciation and amortization (:EBITDA) guidance will increase by $135 million primarily due to the benefits of solid first-quarter results and a marginal improvement for the second-quarter outlook.
Plains All American Pipeline currently has a Zacks Rank #3 (Hold). Apart from Plains All American Pipeline, other stocks in the industry that are worth considering include Kinder Morgan Management LLC (KMR) and Magellan Midstream Partners LP (MMP). Both the organizations hold a Zacks Rank #2 (Buy).
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