Analyt Actions: Credit Suisse Raising Estimates on Plains All American Pipeline's Crude Oil Rail Terminals Buy


All Hail to Rail - Raising Estimates on PAA's $500mm Crude Oil Rail Terminals Acquisition

PAA to Bolster Its Crude Oil Rail Terminals Platform: Plains All American, LP ( PAA ) announced Wednesday it had agreed to buy four operating crude oil rail terminals from US Development Group for $500mm. PAA also agreed to acquire one rail terminal under development as part of the transaction. The transaction is expected to close by year-end.

Raising Estimates: Our 2013E EBITDA increases by $85mm, to $2.16B and our 2014E EBITDA increases by $98mm, to $2.315B. 2013E and 2014E DCF/unit increase by $0.18/unit and $0.22/unit, to $3.59/unit and $3.76/unit respectively. A portion of the estimate increase is due to a recalculation of our projected facilities volumes from PAA's existing operations. We estimate the transaction to be significantly accretive owing to the typically shorter duration of crude by rail contracts and the strength of PAA's balance sheet - $2.4b in liquidity at the end of 3Q:12. We are raising our 2013/2014 EPS estimates to $2.86/$2.96 (from $2.67/$2.74) respectively.

Maintaining Distribution Growth Forecast of ~8%: We are projecting 8%, at the high end of PAA's guidance given estimated distribution coverage of 1.5x in 2013 and 2014.

Holding TP at $52, Reiterate Outperform: We are holding our target yield range at 4.25%-4.75% and holding our TP $52 given PAA's superb balance sheet metrics, liquidity, above average distribution coverage, above average distribution growth outlook, and visibility to growth opportunities. Assuming $2.28/unit in distributions over the next 12 months implies PAA units have 12 month total return potential of 16-29%, keeping us at Outperform.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

Referenced Stocks: PAA

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