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Plains All American Pipeline, L.P. (PAA - Analyst Report) 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 2011.

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 supply contracts.

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.

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