Plains All-American Pipeline LP (PAA and PAGP) Update - 9/23

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Plains All-American Pipeline LP (PAA and PAGP) Update - 9/23

Post by dan_s »

I have posted our updated profile and forecast/valuation model for PAA to the EPG website.

PAA is a rock solid midstream company that gets revenues primarily from the gathering, processing, transportation and storage of crude oil and NGLs.
> I have lowered my valuation to $9.50, but their quarterly cash distributions are secured by more than 2X DCF coverage.
> On revenues of approximately $22.5 Billion this year, PAA should generate $1.8 to $2.0 Billion of cash flow from operations this year.
> Their Capex program has been cut to approximately $1.45 Billion and will be less than $1.0 Billion in 2021, so lots of free cash flow to pay dividends.

PAA is an MLP and PAGP is a C-Corp that pays the exact same dividend of $0.18/quarter. I know a lot of investors don't like MLPs because of the need to wait on K-1s, but PAA's cash distributions are tax deferred. PAGP's dividends are fully taxable.

Annual dividend yield is ~12.8% and they should have more than enough free cash flow to raise their dividends in 2021.
Dan Steffens
Energy Prospectus Group
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