Plains All American Pipeline, L.P. (PAA) announced second-quarter 2013 pro forma earnings per unit of 56 cents, surpassing the Zacks Consensus Estimate by 3 cents.
However, quarterly earnings per unit were 31.7% lower than the year-ago figure primarily due to weak performance at the Transportation segment in terms of a rise in expenses and decrease in profit at the Supply and Logistics segment for thinner crude oil differentials. These negatives were partially offset by a rise in profit at the partnership's Facilities segment due to the positive impacts from a crude oil rail acquisition and an organic project, and higher profitability from natural gas liquids (NGL) fractionation and gas processing.
On a GAAP basis, Plains All American Pipeline's earnings per unit were 57 cents versus 93 cents a year ago. The variation between GAAP and pro forma earnings was due to a penny gain from derivative activities.
Revenues
Plains All American Pipeline reported revenues of $10.3 billion, beating the Zacks Consensus Estimate by $0.4 billion and year-ago results by 3%.
Operational Update
Plains All American Pipeline's total costs and expenses increased 6.3% year over year to $10 billion due to increase in purchases and related costs, field operating costs, general and administrative expenses, and depreciation expenses.
An increase in revenues was more than offset by higher total costs and expenses. In the reported quarter, operating margin declined by 100 basis points to 3.7% from 4.7% in a year ago quarter.
Plains All American Pipeline's interest expenses totaled $75 million, flat with the year- ago level.
Financial Update
As of Jun 30, 2013, Plains All American Pipeline's current assets were $4.8 billion versus $5.1 billion as of Dec 31, 2012.
Long-term debt, as of Jun 30, 2013, was $6.3 billion, flat as of Dec 31, 2012.
Net cash provided by operating activities during the second quarter of 2013 was $358 million, substantially higher than $30 million a year ago due to a decline in net change in assets and liabilities for the acquisitions.
Guidance
Plains All American Pipeline increased the mid-point of its full-year 2013 adjusted earnings before interest, tax, depreciation and amortization guidance by $30 million to $2.19 billion. An increase in guidance was primarily driven by the benefits of solid year-on-date results and chances of better-than-expected performance at the supply and logistics segment in the rest of the year.
Other Company Releases
Buckeye Partners L.P.'s (BPL) second quarter 2013 operating earnings per unit of 72 cents trailed the Zacks Consensus Estimate by 7 cents.
El Paso Pipeline Partners, L.P. (EPB) announced second-quarter 2013 operating earnings of 43 cents per unit, lagging the Zacks Consensus Estimate by 4 cents.
ONEOK Partners L.P. (OKS) reported second-quarter 2013 earnings per unit of 62 cents, beating the Zacks Consensus Estimate by 8 cents.
Our View
Plains All American Pipeline is currently developing its Mississippian Lime pipeline, Rainbow 2 pipeline and Gardendale Gathering System projects. During the earnings call, the partnership has announced its intention to increase its expansion capital program by $200 million to $1.6 billion in 2013.
We believe that the installation of the new pipelines and upgrading the existing ones will allow Plains All American Pipeline to strengthen its presence in the region, subsequently improving the partnership’s forthcoming performance.
However, we are cautious about stringent regulations and volatile commodity pricing, which may to some extent, challenge Plains All American Pipeline’s future results. The partnership currently has a Zacks Rank #3 (Hold).
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