We are maintaining our Neutral recommendation on
Plains All American Pipeline L.P.
). The partnership currently has a Zacks Rank #3 (Hold).
The reiteration was primarily based on volatile commodity
pricing, delay in drilling and development activities caused by
stringent regulations as well as higher costs, and uncertainty in
global capital and credit markets.
Plains All American Pipeline's cash inflow primarily depends on
the transportation of hydrocarbon via its pipeline-networks.
Lesser demand and strict environmental regulations for
hydrocarbon transportation could lower the volumes transported
through its pipelines. Subsequently, these factors will lead to a
decline in the partnership's future cash flow.
However, we consider Plains All American Pipeline's strong crude
oil pipelines and storage asset-portfolio in prospective oil
producing areas as growth drivers, which can mitigate these
Plains All American Pipeline's recent organic as well as
inorganic strategies continue to strengthen its exiting
infrastructure. The partnership also focuses on strategic
acquisitions to expand its global presence.
The partnership intends to invest $1.1 billion in 2013 for
several projects, including Mississippian Lime pipeline, Rainbow
2 pipeline and Gardendale Gathering System projects. As a result,
Plains All American Pipeline will be able to transport higher
volume of commodities and subsequently generate more returns in
the forthcoming quarters.
In addition, Plains All American Pipeline acquired
) subsidiary BP Canada Energy Company. The positive effect of the
acquisition of BP assets was evident in the partnership's
fourth-quarter 2012 results.
ATLAS PIPLN PTR (APL): Free Stock Analysis
BP PLC (BP): Free Stock Analysis Report
DELEK LOGISTICS (DKL): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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On the flip side, global capital and credit markets have been
volatile and disruptive over the past couple of years due to
economic downturn. Plains All American Pipeline's ability to grow
could be constrained in the absence of regular access to the
capital and credit markets as the partnership relies heavily on
these markets to finance its potential acquisitions and other
Other Stocks to Consider
Considering the above mentioned factors we have a modest outlook
for Plains All American Pipeline. There are other stocks in the
industry that show potential to outperform. These include the
Zacks Rank #2 (Buy) stocks of
Atlas Pipeline Partners L.P.
Delek Logistics Partners LP