Plains All American Beats on Earnings & Revs - Analyst Blog

Plains All American Pipeline, L.P. PAA announced first-quarter 2014 adjusted earnings of 65 cents per unit, surpassing the Zacks Consensus Estimate of 56 cents by 16.1%. However, quarterly bottom line dropped 48.4% from $1.26 per unit a year ago, primarily due to higher total costs and expenses as well as unit counts.

The partnership's GAAP earnings were 73 cents per unit versus $1.27 per unit in the prior-year quarter.

The difference between GAAP and adjusted earnings during the reported quarter was due to the combined impact of a gain from derivative activities, equity-indexed compensation expenses, and loss related to foreign currency revaluation and tax effect.

Revenues

Revenues at Plains All American Pipeline at the end of first-quarter were $11,684 million versus $10,620 million in the year-ago period, reflecting growth of 10%.

Increases in sales at the partnership's Supply & Logistics (up 11.2% year over year) and Transportation (up 5.2% year over year) segments led to the revenue surge. This was partially offset by lower contribution from Facilities (down 15.5% year over year) segment.

Reported quarter revenues beat the Zacks Consensus Estimate of $11,259 million by 3.8%.

Operational Update

In the quarter under review, average daily volumes at Plains All American Pipeline's Transportation segment increased 5.5% year over year to 3,840 thousands of barrels.

Under the Facilities segment, average monthly volumes improved $1.7% to 121 millions of barrels from 119 millions of barrels a year ago.

Supply and Logistics segment's average daily volumes were 1,166 thousands of barrels, up 1.8% year over year.

Plains All American Pipeline's total cost and expenses were $11,191 million, up 12.3% year over year primarily due to higher purchases and related costs as well as depreciation expenses.

The partnership's operating income fell 24.7% in first-quarter to $493 million from $655 million a year ago.

Plains All American Pipeline's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) dropped around 23% year over year to $567 million.

Interest expenses increased $1 million to $78 million from the prior-year level, primarily due to a rise in long-term debt level.

Financial Update

Plains All American Pipeline's net cash provided by operating activities during first-quarter 2014 was $822 million versus $979 in the year-ago quarter.

Long-term debt of the partnership, as of Mar 31, 2014, was $6,818 million versus $6,715 million as of Dec 31, 2013. Long-term debt-to-capital ratio at the end of the quarter was 47%.

Guidance

Plains All American Pipeline expects net income in second-quarter and full-year 2014 to range from $224 million to $284 million and $1,258 million to $1,392 million, respectively.

The partnership provided second-quarter and full-year 2014 EBITDA guidance in the band of $416 - $466 million and $2,101 - $2,201 million, respectively.

The partnership expects capital expenditures for expansion projects in 2014 to be $1,750 - $1,950 million and an additional $185 million to $205 million for maintenance of capital expenditure.

At the Peer

Boardwalk Pipeline Partners, LP BWP reported first-quarter 2014 earnings of 44 cents per unit, surpassing the Zacks Consensus Estimate of 32 cents by 37.5%.

Zacks Rank

Plains All American Pipeline currently holds a Zacks Rank #3 (Hold). Other players in the industry include Targa Resources Partners LP NGLS and Delek Logistics Partners, LP DKL. Targa Resources Partners holds a Zacks Rank #1 (Strong Buy) while Delek Logistics carries a Zacks Rank #2 (Buy).