Plains All American Pipeline, L.P.
) has provided its outlook for first quarter of 2012. In February
2012, the company had announced its earnings before interest,
taxes, depreciation and amortization (EBITDA) guidance range of
$380 million to $420 million, with a midpoint adjusted EBITDA
guidance of $400 million.
However, due to strong fundamentals, which mainly include
favorable market conditions and solid execution in all its business
segments, the company expects the mid-point of its guidance to
increase by 15% to 20%.
The company indicated that the guidance does not take into
account the acquisition of the Canadian natural gas liquids ("NGL")
business. Recently, on April 1, 2012, the company completed the
acquisition of the Canadian NGL business from a subsidiary of BP
Corporation North America, Inc.
However, the company stated that the guidance will reflect the
impact of certain debt and equity financing activities that were
completed in March 2012. For the purpose of acquisition, the
company had issued $1.25 billion senior notes, in two tranches. One
series consisted of $750 million 3.65% senior unsecured notes due
on June 1, 2022 and the other comprised $500 million 5.15% senior
unsecured notes due on June 1, 2042.
The company expects distribution growth to be in the range of 5%
to 8% in fiscal 2012. On a conservative note, the company expects
it to be in the range of 6.5% to 7.5%. In January this year, Plains
All American Pipeline announced a new quarterly cash distribution
rate of $1.025 per unit on all of its outstanding limited partner
units. The new distribution rate reflects a 3.0% growth over the
quarterly distribution of 99.5 cents per unit paid in November
The company maintains a strong balance sheet by deploying its
strategy of using a mix of equity and debt to finance its
acquisitions and growth projects. We believe that the company's
portfolio of crude oil pipeline and storage assets are
strategically located in well-established oil producing regions
that serve major U.S. refinery and distribution markets. The
strategic acquisition of BP assets is expected to act as a positive
catalyst and boost the partnership's midstream business through
additional pipelines, storage capacity, fractionation plants and
However, we are concerned about the global capital and credit
markets, which have been very volatile and disruptive over the past
year due to the economic downturn. The company presently retains a
short-term Zacks #3 Rank (Hold). We have a long-term Outperform
recommendation on the stock.
Plains All American Pipeline, L.P. is a publicly traded master
limited partnership engaged in the transportation, storage,
terminalling and marketing of crude oil and refined products, as
well as in the processing, transportation, fractionation, storage
and marketing of natural gas liquids. Through its general partner
interest and majority equity ownership position in
PAA Natural Gas Storage, L.P.
), PAA owns and operates natural gas storage facilities.
PLAINS ALL AMER (
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