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Key Takeaways from Plains All American Pipeline’s 3Q15 Earnings

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3Q15 earnings highlights

Plains All American Pipeline (PAA) reported its third quarter earnings on November 3, 2015, after the markets closed. Below are the key points of the results:

  • EBITDA (earnings before interest, tax, depreciation, and amortization) of $483 million for the quarter was 8% lower compared to $526 million for 3Q14. Adjusted EBITDA, though lower, was above the mid-point of its quarterly guidance range.
  • Distributable cash flow fell 8.4% year-over-year from $369 million in 3Q14 to $338 million in 3Q15.
  • The company believes that in the near term, the business environment remains challenging due to the impacts of excess capacity and competitive pressures. However, PAA is constructive on the intermediate to long-term outlook for crude oil prices, activity levels, and its own growth prospects.
  • PAA had announced a 0.7% quarter-over-quarter rise in distributions to $0.70 per unit.

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PAA’s total returns lag industry average

PAA has generated a total return of -31.4% since the start of this year. Over the same period, its peers Magellan Midstream Partners (MMP), Sunoco Logistics Partners (SXL), and Enbridge Energy Partners (EEP) have generated returns of -12.9%, -24.6%, and -21.8%, respectively. Total returns year-to-date for Enterprise Products Partners (EPD) and the Alerian MLP ETF (AMLP) are -17.6% and -15.0%, respectively.

As the above graph shows, PAA’s returns were moving roughly with its peers until the end of May when the massive oil spill along the Santa Barbara County coastline sent its unit price tumbling. PAA units fell again significantly after its 2Q15 results in August. In the earnings announcement, PAA revised its 2015 guidance near the lower end of the 2015 guidance range. Since then, PAA’s returns have lagged behind its peers’. PAA was down 4.5% in after-hours trading on November 3.

In this series, we’ll take a look at Plains All American Pipeline’s revenue and EBITDA growth in 3Q15. We’ll also look at segment performance, distribution growth, valuation, and future prospects.

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