On Sep 9, 2014, the units of Plains All American Pipeline, L.P. (PAA) touched a 52-week high of $61.09. However, the unit price declined marginally to $60.74 at the end of the trading session on that day.
We have identified several catalysts, including systematic investments in growth projects, a well-diversified set of midstream assets, stable liquidity position and regular cash distribution payouts, which collectively helped Plains All American to hit the 52-week high mark. These positives are expected to act as key value drivers for the partnership’s future growth as well.
Plains All American has midstream assets in several mineral-rich regions such as the Eagle Ford Shale, Permian and Williston basins, Gulf Coast and other North American regions including some in Canada. The partnership focuses on the expansion of its midstream operations.
On Aug 21, 2014, Plains All American announced that it will build a 440-mile, 20-inch Diamond Pipeline, spanning from the Plains Cushing OK terminal to the Valero Refinery in Memphis, TN. The estimated cost of the project is around $0.9 billion. Upon completion, the new pipeline will transport up to 200,000 barrels of domestic sweet crude oil per day. The objective of this new venture is to meet the increasing demand for midstream services in the region.
In 2014, Plains All American plans to invest in the range of $1.85–$2.05 billion in expansion activities. The majority of the capital outlay will be allocated for projects in the Permian Basin. The partnership’s efforts to expand capacity, both through the addition of new assets and the expansion of existing facilities, will enable it to serve more customers, thereby increasing cash inflows.
Plains All American maintains a steady liquidity position. As of Jun 30, 2014, the partnership had total available liquidity of around $2.23 billion. A favorable liquidity profile supports the partnership’s strategic capital spending program.
In addition, Plains All American is keen on maximizing unitholder wealth through regular as well as incremental distributions. In Jul 2014, the partnership increased its quarterly distribution rate 2.4% sequentially to 64.50 cents per unit.
Plains All American currently holds a Zacks Rank #3 (Hold). However, some better-ranked stocks in the sector include Delek Logistics Partners, LP (DKL), Sunoco Logistics Partners L.P. (SXL) and Valero Energy Partners LP (VLP). All three stocks sport a Zacks Rank #1 (Strong Buy).
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