Plains All American Pipeline, L.P. (PAA) reported second-quarter 2014 adjusted earnings of 49 cents per unit, surpassing the Zacks Consensus Estimate of 46 cents by 6.5%. However, quarterly earnings decreased 12.5% year over year primarily due to increases in total costs and expenses as well as units outstanding.
On a GAAP basis, the partnership’s earnings per unit were 45 cents compared with 57 cents a year ago. The variance between GAAP and adjusted earnings was due to the combined impact of a loss from derivative activities, equity-indexed compensation expenses and gain on foreign currency revaluation.
Total Revenue
In the second quarter, total revenues at Plains All American Pipeline were $11,195 million, beating the Zacks Consensus Estimate of $10,885 million by 2.8%. Reported revenues also increased 8.7% year over year.
Increases in sales at the partnership’s Transportation (up 12.9% year over year) and Supply & Logistics (up 9.3% year over year) segments led to higher revenues. This was partially offset by a lower contribution from Facilities (down 20.4% year over year).
Operational Update
In the quarter under review, average daily volumes at Plains All American Pipeline’s Transportation segment increased 9.1% year over year to 3,931 thousand barrels.
In the Facilities segment, average monthly volumes edged down 0.8% to 120 million barrels from 121 million barrels a year ago.
Supply and Logistics segment’s average daily volumes were 1,070 thousand barrels, up 4.9% year over year.
In the second quarter, Plains All American Pipeline’s total cost and expenses were $10,830 million, up 9.3% year over year primarily due to higher purchases and related costs, depreciation expenses and field operating costs.
The partnership’s operating income decreased 4.7% to $365 million from $383 million a year ago.
Plains All American Pipeline’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $512 million, up 7.1% year over year.
Interest expenses increased 9.3% year over year to $82 million, primarily due to a rise in total debts.
Financials
As of Jun 30, 2014, Plains All American Pipeline had long-term debt of $7.4 billion versus $6.7 billion as of Dec 31, 2013. The long-term debt-to-total book capitalization ratio at the end of the quarter was 48%.
In the second quarter of 2014, the partnership’s cash flow from operating activities was $0.14 billion, down from $0.36 billion in the prior-year period.
Guidance
Plains All American Pipeline provided adjusted earnings per unit guidance for third-quarter, fourth-quarter and full-year 2014 in the range of 36–53 cents, 61–78 cents and $2.12– $2.46, respectively.
The partnership expects adjusted EBITDA for third-quarter, fourth-quarter and full-year 2014 to be $455–$505 million, $591–$641 million and $2,125–$2,225 million, respectively.
For 2014, Plains All American Pipeline plans to invest $1,850–$2,050 million on expansion projects and $185–$205 million for maintenance activities.
At the Peers
Access Midstream Partners, L.P. (ACMP) reported second-quarter 2014 earnings of 18 cents per unit, missing the Zacks Consensus Estimate by 33.3%.
Enterprise Products Partners L.P. (EPD) announced second-quarter 2014 earnings of 67 cents per unit, missing the Zacks Consensus Estimate by 8.2%.
ONEOK Partners, L.P. (OKS) reported second-quarter 2014 earnings of 54 cents per unit, missing the Zacks Consensus Estimate of 66 cents by 18.2%.
Our Take
Despite beating the earnings and revenue estimates and coming in within the earnings guidance, units of Plains All American Pipeline edged down 0.7% from the previous day’s closing price due to the year-over-year earnings decline.
Plains All American Pipeline continues to expand its asset base, install new pipelines and upgrade existing infrastructure. These initiatives will enable the partnership to strengthen its presence in the region and serve more customers.
Plains All American Pipeline currently holds a Zacks Rank #2 (Buy).
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