Magnetar and Plains Group Holdings
During 4Q14, Magnetar Capital increased its position in Plains Group Holdings LP (PAGP) with the purchase of 4.8 million shares. It represents 2.36% of the fund’s portfolio at the end of the fourth quarter.
Overview of Plains Group Holdings
Plains Group Holdings is the GP (general partner) that owns the incentive distribution rights of Plains All American Pipeline LP (PAA)—a MLP (master limited partnership) that engages in midstream energy operations. Through its pipelines, terminalling, storage, and gathering assets, Plains All American Pipeline provides logistics services including crude oil, NGLs (natural gas liquids), natural gas, and refined products in the US and Canada.
Plains All American Pipeline’s operations are divided into three segments:
- Supply and Logistics
Plains All American Pipeline accounts for ~8% of the Alerian MLP ETF (AMLP).
Fourth Quarter Highlights
For the fourth quarter, revenue fell ~11% YoY (year-over-year) to ~$9.5 billion. Revenue fell due to the partnership’s Facilities segment and Supply and Logistics segment. Their revenue declined by ~31.5% and ~10.1%, respectively. To an extent, the ~11.9% YoY increase in revenue from the Transportation segment helped offset this decline.
The company reported a net income of $389 million, or $0.67 per limited partner unit—compared to $309 million, or $0.58 per unit last year.
The adjusted net income, after excluding certain items, stood at $362 million or $0.60—it was down from $371 million or $0.76 in 4Q13. Wall Street analysts’ estimates pegged earnings at $0.59 on a revenue of $11.4 billion.
Other companies like Spectra Energy Partners (SEP) reported earnings of $0.95 per share versus estimates of $0.65. Magellan Midstream Partners (MMP) reported earnings of $0.93 versus estimates of ~$0.94.
Plains All American Pipeline lowered its 2015 adjusted guidance from the previous estimate of $2.35–$2.5 billion with a midpoint of $2.425 billion. It lowered its estimate to $2.25–$2.45 billion with a midpoint of $2.35 billion.
The company also lowered its distribution growth guidance in 2015. In November 2014, the company said it expected distribution to grow by ~7%–10% over 2014. In the recent earnings release, the company now expects a distribution growth of 7% in 2015.
The lower guidance is based on WTI (West Texas Intermediate) oil prices hovering around $50 per barrel in 2015. It’s also based on the anticipation that producer drilling activities will be significantly lower in 2015—compared to 2014.
For a more detailed analysis, read Significant updates from Plains All American Pipeline’s 4Q14 earnings.
In the next part of this series, we’ll discuss Magnetar’s increased position in Actavis.