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PAA Plans to Acquire its Unit PNG

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Plains All American Pipeline, L.P. (PAA - Free Report) has announced its plan to acquire its subsidiary, PAA Natural Gas Storage, L.P. . The partnership has already submitted an application for the acquisition to the independent directors of the board of directors of PAA Natural Gas Storage. Plains All American Pipeline plans to purchase all of the outstanding publicly-held common units of PAA Natural Gas Storage through a unit-for-unit exchange. The completion of the transaction depends on several approvals.

Per the proposal, the unitholders of PAA Natural Gas Storage will receive 0.435 common units of Plains All American Pipeline in exchange for per unit of PAA Natural Gas Storage common unit. The rate of common unit will be $22.74, calculated on the basis of trailing 10-day average closing price of Plains All American Pipeline’s common units through Aug 26, 2013.

PAA Natural Gas Storage primarily deals with natural gas storage facility. The partnership provides services to its customers from its three natural gas storage facilities located in La., Miss. and Mich.

Despite having a positive long-term view of the natural gas storage market, the unpredictable timing and extent of recovery of the natural gas storage condition resulted in the proposed acquisition.

As per the EIA report, natural gas inventory level will steadily decrease to 3,800 billion cubic feet at the end of Oct, 2013 from the year-ago level. In 2013, natural gas consumption will improve primarily due to colder temperatures. This factor will help Plains All American Pipeline to improve its revenues, going forward.

In addition, Plains All American Pipeline’s strong liquidity position, having a total available liquidity of $2.6 billion with $1.5 billion under revolving credit facility, will enable the partnership to improve PAA Natural Gas Storage’s future operations.

Houston, Texas-based Plains All American Pipeline is engaged in transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas and other natural gas-related petroleum products in North America.

Plains All American Pipeline currently has a Zacks Rank #3 (Hold). However, other stocks from the industry that are presently performing well include Magellan Midstream Partners LP (MMP - Free Report) with a Zacks Rank #1 (Strong Buy), and Delek Logistics Partners LP (DKL - Free Report) with a Zacks Rank #2 (Buy).

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