uploads/2016/10/paas-EBITDA-by-segment-2-1.jpg

Which Segment Will Drive Plains All American’s 3Q16 Earnings?

By

Updated

PAA’s Transportation segment

Plains All American Pipeline (PAA) operates under the following three segments:

  • Transportation
  • Facilities
  • Supply and Logistics

PAA’s Transportation segment contributed ~57% to its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in 2Q16. The segment’s EBITDA rose 2% year-over-year (or YoY) in 2Q16.

The graph above shows the segments’ contributions to PAA’s EBITDA over the last nine quarters. The company’s acquisition of Spectra Energy’s (SE) Canadian NGLs (natural gas liquids) business, which it completed in August 2016, should contribute to the Transportation segment’s 3Q16 EBITDA.

The acquisition includes an NGL extraction and fractionation facility at Empress, a petroleum pipeline, seven NGLs terminals, and two NGLs storage facilities in Western Canada.

Plains All American Pipeline’s Transportation segment transports crude oil and NGLs via pipelines, trucks, and barges.

Article continues below advertisement

Facilities segment

Plains All American’s Facilities segment contributed ~35% to its adjusted EBITDA in 2Q16. The segment’s EBITDA rose 10% year-over-year. It provides storage, terminaling, and throughput services for crude oil, NGLs, natural gas, and refined products. The segment also provides NGLs fractionation services and processes natural gas and condensate.

PAA’s recently acquired Canadian NGLs business should contribute to the segment’s 3Q16 EBITDA.

Supply and Logistics segment

The Supply and Logistics segment’s contribution to PAA’s EBITDA fell from 17% in 2Q15 to 8% in 2Q16. The segment has been facing headwinds for the last few quarters. There seem to be no clear catalysts available to boost the segment’s 3Q16 performance.

The segment purchases crude oil, NGLs, and natural gas. It stores, transports, and resells these products.

Let’s next take a look at how increased utilization of PAA’s asset base may contribute to its potential EBITDA growth.

Advertisement

More From Market Realist