Plains All American Pipeline, L.P.
) announced second-quarter 2012 operating earnings of $1.64 per
unit, up 46% from earnings of $1.12 per unit reported in the
year-ago quarter. This year-over-year increase was attributable to
favorable growth contributed by each of the partnership's segments.
Quarterly earnings were a penny ahead of the Zacks Consensus
On a GAAP basis, Plains reported earnings of $1.85 per unit
compared with $1.13 per unit in the prior-year quarter. The
difference of 21 cents between operating and GAAP earnings was due
to a gain of 47 cents related to other derivative activities, a
charge of 3 cents related to derivative activities, equity
compensation costs of 7 cents, foreign currency revaluation charge
of 10 cents and 6 cents for acquisition-related expenses.
Overall revenue at Plains All American Pipeline at the end of
second-quarter 2012 was $9,786 million versus $8,859 million in the
year-ago period, reflecting growth of 10.5%. The year-over-year
growth was driven by strong performance from
Supply & Logistics
segments. Reported quarter revenue marginally beats the Zacks
Consensus Estimate of $9,784 million.
Volumes from transportation activities posted an upsurge of 17% to
3,563 thousand barrels per day with operation in Basin Systems
being the major contributor. Adjusted profit during the quarter
rose sharply by 31% year over year. The main driver of this profit
expansion was several acquisitions in late 2011 and late 2012, and
higher pipeline tariffs and volumes.
Adjusted profit at the segment climbed 31% year over year. The
growth was due to capacity expansion from organic growth projects,
which were completed recently, and several acquisitions completed
in late 2011 and early 2012.
Supply & Logistics:
Segment profit increased 63% in the reported quarter. The growth
resulted from increased lease gathering volumes and margins, and
positive crude oil market conditions.
Total cost and expenses during the quarter increased 9% year over
year to $9,324 million. The combined effect of a rise in purchases
and allied costs, field operating expenses, general and
administrative expenses, and depreciation and amortization charges
were responsible for this hike in expenses.
In the current quarter, adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) rose to $557 million from
$367 million reported in the prior year. This was mainly driven by
higher-than-estimated pipeline volumes and strong performance in
the favorable market conditions.
The positive effect from the revenue surge mitigated the rise in
total costs, thereby boosting the operating margin of the
partnership in the current quarter. Operating income increased 55%
to $462 million at the end of the second quarter.
Cash from operating activities during the quarter was $30 million
versus $318 million in the prior-year quarter. During the quarter,
the partnership invested $466 million for its acquisition
Long-term debt of the partnership as of June 30, 2012 was $5.8
billion compared with $4.5 billion as of December 31, 2011.
The new quarterly distribution rate of the partnership is $1.065
per unit, or $4.26 per unit on an annualized basis, payable on
August 14, 2012. The new distribution rate reflects quarterly
growth of 1.9% and rise of 8.4% year over year.
The partnership expects to benefit from strong industry
performances in 2012. It affirmed its distribution rate increase
target of 8% - 9% in 2012.
Enterprise Products Partners L.P.
), which competes with Plains All American Pipeline L.P., reported
second-quarter 2012 earnings per limited unit of 64 cents,
surpassing the Zacks Consensus Estimate of 59 cents and grew more
than 25% from 51 cents a year ago.
Revenues in the quarter declined nearly 13% year over year to $9.8
billion. The revenue decline was primarily due to lower commodity
prices and lower sales for petroleum products, partially offset by
higher overall volumes. Quarterly revenue failed to meet the Zacks
Consensus Estimate of $12 billion.
We view Plains All American Pipeline as an organization with strong
crude oil pipelines and storage assets portfolio in prospective oil
producing regions. Moreover, the partnership's $1 billion
investment plan in organic growth project for full-year 2012 will
further enable it expand its operation to serve major U.S. refinery
and distribution markets. We believe the partnership's positional
advantage will fuel its future performance.
However, we are concerned about stringent regulations and higher
costs associated with offshore drilling, commodity price
fluctuation, and volatile global capital and credit markets.
Plains All American Pipeline, L.P. currently retains a Zacks #3
Rank, which translates into a short-term Hold rating.
Houston, Texas-based Plains All American Pipeline, L.P. owns assets
strategically located in well-established oil producing regions,
catering to major U.S. refinery and distribution markets.
ENTERPRISE PROD (EPD): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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