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Must-know: Plains All American Pipeline’s segment-wise earnings

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Segment-wise earnings

Below is a chart of Plains All American Pipeline, L.P.’s (PAA) profits by segment.

Transportation segment

Adjusted segment profit for the transportation segment was $229 million—~37% higher YoY (or year-over-year)—and approximately $24 million above the midpoint of PAA’s guidance.

The more-than-expected segment profit was driven by higher-than-anticipated pipeline loss allowance barrels and component gains on PAA’s NGL (or natural gas liquids) pipelines.

Plus, less than forecasted seasonal flooding down time on certain Canadian pipelines and lower operating expenses also helped in the increase.

Facilities segment

Adjusted segment profit for the facilities segment was $138 million, which was in line with the midpoint of PAA’s guidance. But profits were ~10% lower on a YoY basis.

The decline was attributed to lower third-party volumes moving to PAA’s St. James Terminal and longer transit times in rail movements due to congestion. Plus, NGL fractionation volumes were lower than forecasted primarily due to upstream pipeline constraints relating to supply.

Supply and logistics segment

Adjusted segment profit for the supply and logistics segment was $144 million—$30 million higher than the midpoint of PAA’s guidance. But profits declined by 6% YoY. The decrease was a result of “less favorable NGL market conditions.”

Guidance for 3Q14 and the rest of 2014

For the transportation segment, PAA expects volumes to average approximately 4.1 million bpd (or barrels per day)—200,000 bpd higher than second quarter volumes. The volume increase is spread out across all the major resource plays.

For the facilities segment, PAA expects an average capacity of 122 million barrels of oil equivalent. The increase in volumes as compared to the second quarter is primarily due to increased rail movements, particularly in the St. James facility.

For the supply and logistics segment, PAA expects volumes to average approximately 1.1 million bpd, which is consistent with volumes in the second quarter.

Management’s 2014 adjusted EBITDA (or earnings before interest, tax, depreciation, and amortization) guidance is $2,175 million, the midpoint, which is $117 million below the $2,292 million achieved in 2013.

The expected decrease reflects the management’s anticipation of a “return to baseline” in the supply and logistics segment’s performance. The market conditions during 2013 were extremely favorable for this segment.

Quarterly and YoY decreases in the supply and logistics segment’s profits are expected to continue.

Key ETFs

PAA is a component of the Alerian MLP (or master limited partnership) ETF (AMLP), Global X MLP ETF (MLPA), First Trust North American Energy Infrastructure Fund (EMLP), and Global X MLP and Energy Infrastructure ETF (MLPX).

Read on to the next part to know about PAA’s growth projects.

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