Back to top

Analyst Blog

Plains All American Pipeline, L.P. (PAA - Analyst Report) announced first-quarter 2013 pro forma earnings per unit of $1.26, surpassing the Zacks Consensus Estimate by 38 cents. Quarterly earnings were 59.5% higher than the year-ago figure primarily due to strong results from the fee-based Transportation and Facilities segments, and proper implementation in the margin-based Supply and Logistics segment.

On a GAAP basis, Plains All American Pipeline’s earnings increased 149% year over year to $1.27 per unit. The variation between GAAP and pro forma earnings were due to a penny gain from derivative activities, foreign currency revaluation and other favorable impacts.

Revenues

Revenues were $10.6 billion, beating the Zacks Consensus Estimate by $0.9 billion and year-ago results by 15.2%.

Segment Details

Transportation: Adjusted profit from this segment increased 1.2% year over year to $175 million due to higher pipeline volumes and benefits from the acquisition of natural gas liquids (NGL) assets from a subsidiary of BP plc (BP - Analyst Report).

Facilities: Plains All American Pipeline reported adjusted profit of $156 million, up 56% year over year due to addition of capacity from the BP NGL assets, acquisitions of rail terminal and completion of organic projects.

Supply and Logistics: Segmental adjusted profit increased 107% year over year due to proper implementation of business models in favorable crude oil market conditions, higher NGL sales volumes, and increase in lease gathering volumes and margins.

Operational Update

Plains All American Pipeline’s total costs and expenses increased 12% year over year to $10 billion due to increases in purchases and related costs, field operating costs, general and administrative expenses, and depreciation expenses.

The partnership’s operating income increased 109.3% year over year to $655 million.

Interest expenses totaled $77 million, up 18.5% year over year primarily attributable to the rising long-term debt level.

Financial Update

As of Mar 31, 2013, Plains All American Pipeline’s long-term debt was $6,331 million versus $6,320 million as of Dec 31, 2012.

Net cash provided by operating activities during the first three months of 2013 was $979 million, higher than $317 million in the year-ago comparable period.

Cash Distribution Update

Plains All American Pipeline recently increased its quarterly cash distribution by 2.2% sequentially and 10% year over year to 57.50 cents per unit on all of its outstanding limited partner units. It will be paid on May 15, 2013, to unitholders of record as of May 3.

Guidance

Plains All American Pipeline expects its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in 2013 to increase by $135 million primarily due to the benefits of solid first-quarter results and a marginal improvement for the second-quarter outlook.

Other Company Releases

El Paso Pipeline Partners (EPB - Snapshot Report) announced first-quarter operating earnings of 58 cents per unit, surpassing the Zacks Consensus Estimate by 4 cents.

ONEOK Partners L.P. (OKS - Analyst Report) reported first-quarter earnings per unit of 42 cents, missing the Zacks Consensus Estimate by 16 cents.

Our View

Positive impact of the acquisition of BP assets is evident in Plains All American Pipeline’s quarterly results. This acquisition boosted its midstream business through addition of pipelines, storage capacity, fractionation plants and supply contracts. These factors will subsequently help to improve the partnership’s forthcoming performance.

Plains All American Pipeline intends to invest additional $300 million in 2013 to strengthen its existing assets while expanding operations in the U.S. and Canada. This additional investment will push the capital expenditure to $1.4 billion.

However, we are cautious about stringent regulations and volatile commodity pricing, which may to some extent challenge Plains All American Pipeline’s future results.

Houston, Texas-based Plains All American Pipeline owns assets strategically located in well-established oil producing regions, catering to major U.S. refinery and distribution markets. The partnership currently has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.