Plains All American Pipeline, L.P. (PAA) reported third-quarter 2014 adjusted earnings of 49 cents per unit, missing the Zacks Consensus Estimate of 51 cents by 3.9%. Moreover, quarterly earnings decreased 2% year over year primarily due to higher total expenses and an increase in units outstanding.
On a GAAP basis, the partnership's earnings were 52 cents per unit compared with 38 cents per unit a year ago. The variance between adjusted and GAAP earnings was due to the combined impact of charges related to foreign currency revaluation and the tax effect on selected items, and the gain from derivative activities.
Total Revenue
In the third quarter, total revenues at Plains All American Pipeline were $11.1 billion, lagging the Zacks Consensus Estimate by 5%.
Reported revenues surged around 4% year over year due to increases in sales at the partnership's Transportation (12.2%), Supply & Logistics (3.9%) and Facilities (0.4%) segments.
Operational Update
In the quarter under review, average daily volumes at Plains All American Pipeline's Transportation segment increased 13% year over year to 4,226 thousand barrels.
In the Facilities segment, average monthly volumes edged up 0.8% to 121 million barrels from 120 million barrels a year ago.
The Supply and Logistics segment's average daily volumes were 1,124 thousand barrels, up 11.8% year over year.
In the third quarter, Plains All American Pipeline's total cost and expenses was $10,723 million, up around 3% year over year primarily due to higher purchases and related costs.
The partnership's operating income increased 36.5% to $404 million from $296 million a year ago.
Plains All American Pipeline's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $527 million, up 9.8% year over year.
Interest expenses increased 18.1% year over year to $85 million, primarily due to a rise in total debts.
Financials
As of Sep 30, 2014, Plains All American Pipeline had long-term debt of $7.6 billion versus $6.7 billion as of Dec 31, 2013. The long-term debt-to-total book capitalization ratio at the end of the quarter was 48%.
In the third quarter of 2014, the partnership's cash flow from operating activities was $0.32 billion, up from $0.26 billion in the prior-year period.
Guidance
Plains All American Pipeline reiterated its guidance for 2014 adjusted EBITDA to around $2.18 billion. In addition, the partnership provided preliminary 2015 adjusted EBITDA guidance in the range of $2.35–$2.5 billion, with a midpoint of around $2.43 billion.
For 2014, Plains All American Pipeline plans to invest $1.95–$2.15 billion on expansion projects. The partnership also provided its guidance for 2015 expansion capital expenditures in the range of $1.5–$2.0 billion.
Other Peers Releases
Enterprise Products Partners L.P. (EPD) posted third-quarter 2014 earnings of 37 cents per unit, in line with the Zacks Consensus Estimate.
Magellan Midstream Partners L.P. (MMP) announced third-quarter 2014 earnings of 71 cents per unit, surpassing the Zacks Consensus Estimate of 66 cents by 7.6%.
ONEOK Partners, L.P. (OKS) reported third-quarter 2014 adjusted earnings of 63 cents per unit, surpassing the Zacks Consensus Estimate of 62 cents by 1.6%.
Our View
Despite missing both earnings and revenues estimates in the third-quarter 2014, the reported top line improved year over year on the back of growth on crude oil pipeline and lease gathering volumes.
Plains All American Pipeline continues to expand its operations in key mineral-rich region in the U.S., including the Eagle Ford area. These projects will enable the partnership to serve more upstream players, thereby improving future revenues.
However, we are cautious about stringent regulations and volatile commodity pricing, which may challenge Plains All American Pipeline's future results to some extent.
Plains All American Pipeline currently holds a Zacks Rank #3 (Hold).
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