Plains All American Pipeline’s distributions
On January 12, 2016, Plains All American Pipeline (PAA) announced a quarterly cash distribution of $0.70 per limited partner unit, which was unchanged from its 3Q15 per unit distribution. Plains All American had indicated the likelihood of a very low or zero distribution growth in 2016 back in August 2015. The company’s 3Q15 distribution coverage ratio was 0.79x, and it will report its 4Q15 earnings on February 8, 2016. PAA makes up ~7.6% of the Global X MLP ETF (MLPA), which consists of 30 energy sector MLPs.
Among Plains All American’s peers, Enterprise Products Partners (EPD) increased its 4Q15 distributions by 1.3%. However, Kinder Morgan (KMI) slashed its 4Q15 dividends by 75% compared to 3Q15 while Enbridge Energy Partners’ (EEP) 3Q15 distributions were flat quarter-over-quarter.
Plains All American’s capital expenditures
The above graph shows Plains All American’s distributable cash flows and total capital expenditures over the last three years. The right axis shows the company’s per-share distribution.
As the graph shows, the company’s planned capital expenditures for 2015 are nearly 14% higher compared to 2014. However, Plains All American expects its 2016 capital program to be ~25% to 30% lower than its $2.2 billion 2015 capital program. The company expects its 2015 capital spending to contribute to its future EBITDA (earnings before interest, tax, depreciation, and amortization) growth.
Plains All American’s distributable cash flow
As the above graph shows, Plains All American’s distributable cash flows have seen significant declines over the last two quarters. The current challenging commodity price environment has impacted the performance of most midstream companies.
In the company’s 3Q15 earnings release, Greg Armstrong, Chairman and CEO of Plains All American, stated that the company remains “constructive on the intermediate to long-term outlook for crude oil prices, activity levels, and PAA’s growth prospects.” By contrast, Armstrong made clear that “in the near term, we remain cautious due to the impacts of excess capacity and related competitive pressures, and our fourth quarter guidance reflects our most current view of the near-term environment.”
Continue to the next part for a discussion of Plains All American’s forward distribution yield.