Plains All American Pipeline, L.P. (PAA - Free Report) has been gaining from steady investments in regulated infrastructure. The firm’s debt reduction initiatives, joint ventures and asset divestitures will further drive its performance.
However, this Zacks Rank #3 (Hold) firm faces risks related to excess pipeline capacity in some regions, which might lower the demand for its midstream services.
Tailwinds
Plains All American maintains a systematic capital investment strategy to expand its operations through organic growth initiatives. It currently has some new projects in the resource-rich regions. For 2023, Plains All American projects capital investment of $325 million and a maintenance capital of $195 million. The firm is currently focusing on smaller projects to improve returns across its system.
PAA completed the Plains Oryx Permian JV, and is presently working on integration of the system and capturing synergies from the same. In July 2023, Permian JV acquired the remaining 43% non-operated interest in the OMOG JV from Diamondback Energy for $225 million or approximately $145 million net to PAA's 65% interest. Plains All American now owns 100% of OMOG and its subsidiaries. This transaction was funded with excess free-cash flow.
The firm continues to enjoy a favorable financial position. It has enough liquidity to meet operating, investing and financing requirements. It expects free cash flow of $1.6 billion in 2023. Of this amount, $600 million is for free cash flow after distributions available for net-debt reduction.
Headwinds
Plains All American’s operations are subject to extensive federal, state and local regulations, managing transportation and processing of materials, thereby protecting the environment and wildlife.
Hydraulic fracturing is an important and common practice that is widely used for the production of hydrocarbons from unconventional geological formations in the United States. Legislation and regulatory initiatives relating to hydraulic fracturing could reduce domestic production of crude oil and natural gas. This, in turn, might lower the demand for midstream services provided by the partnership.
Stocks to Consider
Some better-ranked stocks for investors interested in the sector are TXO Partners LP (TXO - Free Report) , carrying a Zacks Rank #2 (Buy), and Constellation Energy Corporation (CEG - Free Report) and Nextracker Inc. (NXT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TXO’s 2023 earnings implies a year-over-year increase of 300%. The same for sales implies year-over-year growth of 51.2%.
CEG’s long-term (three to five years) earnings growth rate is 23.3%. The consensus estimate for 2023 earnings per share (EPS) implies a year-over-year increase of 1,206.1%.
NXT’s long-term earnings growth rate is 37.6%. The consensus mark for fiscal 2024 EPS implies a year-over-year improvement of 512.5%.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
Plains All American Pipeline, L.P. (PAA - Free Report) has been gaining from steady investments in regulated infrastructure. The firm’s debt reduction initiatives, joint ventures and asset divestitures will further drive its performance.
However, this Zacks Rank #3 (Hold) firm faces risks related to excess pipeline capacity in some regions, which might lower the demand for its midstream services.
Tailwinds
Plains All American maintains a systematic capital investment strategy to expand its operations through organic growth initiatives. It currently has some new projects in the resource-rich regions. For 2023, Plains All American projects capital investment of $325 million and a maintenance capital of $195 million. The firm is currently focusing on smaller projects to improve returns across its system.
PAA completed the Plains Oryx Permian JV, and is presently working on integration of the system and capturing synergies from the same. In July 2023, Permian JV acquired the remaining 43% non-operated interest in the OMOG JV from Diamondback Energy for $225 million or approximately $145 million net to PAA's 65% interest. Plains All American now owns 100% of OMOG and its subsidiaries. This transaction was funded with excess free-cash flow.
The firm continues to enjoy a favorable financial position. It has enough liquidity to meet operating, investing and financing requirements. It expects free cash flow of $1.6 billion in 2023. Of this amount, $600 million is for free cash flow after distributions available for net-debt reduction.
Headwinds
Plains All American’s operations are subject to extensive federal, state and local regulations, managing transportation and processing of materials, thereby protecting the environment and wildlife.
Hydraulic fracturing is an important and common practice that is widely used for the production of hydrocarbons from unconventional geological formations in the United States. Legislation and regulatory initiatives relating to hydraulic fracturing could reduce domestic production of crude oil and natural gas. This, in turn, might lower the demand for midstream services provided by the partnership.
Stocks to Consider
Some better-ranked stocks for investors interested in the sector are TXO Partners LP (TXO - Free Report) , carrying a Zacks Rank #2 (Buy), and Constellation Energy Corporation (CEG - Free Report) and Nextracker Inc. (NXT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TXO’s 2023 earnings implies a year-over-year increase of 300%. The same for sales implies year-over-year growth of 51.2%.
CEG’s long-term (three to five years) earnings growth rate is 23.3%. The consensus estimate for 2023 earnings per share (EPS) implies a year-over-year increase of 1,206.1%.
NXT’s long-term earnings growth rate is 37.6%. The consensus mark for fiscal 2024 EPS implies a year-over-year improvement of 512.5%.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
Get the latest research report on CEG - FREE
Get the latest research report on PAA - FREE
Get the latest research report on TXO - FREE
Get the latest research report on NXT - FREE