Oppenheimer Downgrades Plains All American, Says It Needs Clarity

• The share price of Plains All American Pipeline, L.P. PAA has declined 61.24 percent year-to-date, touching a low of $18.72 on December 7.
• Oppenheimer's Bernard Colson has downgraded the rating on the company to Perform.
• Colson believes that among the MLPs, the company appears to have few attractive options for 2016 and more clarity was required regarding its plan of action.

Analyst Bernard Colson mentioned that an analysis of estimated sources and uses of cash for 2016 among Oppenheimer's Outperform rated MLPs, “the majority of names have adequate capital to carry out their 2016 business plans without issuing new equity.”

Plains All American is among the few companies that would need to raise equity in 2016. However, unless there is a significant improvement in the operating environment, Colson expects the company to need equity worth about $1 billion in 2016 to sustain leverage of 4.5x.

According to the Oppenheimer report, “With an all-in cost of equity greater than 20 percent, the common equity market is effectively closed to PAA, in our view. We believe PAA will need to turn to non-traditional methods to secure its 2016 business plan.”

Although the current stock valuation appears to already include some expectations of a reduction in distribution, Colson prefers to step to the sidelines until there is more clarity regarding the solution that Plains All American chooses.