Plains All-American Pipeline LP (PAA & PAGP) Update - Apr 25

Plains All-American Pipeline LP (PAA & PAGP) Update - Apr 25

Postby dan_s » Sun Apr 25, 2021 1:31 pm

Since PAA announced Q4 2020 results and 2021 guidance in early February, 7 energy sector analysts have updated their models and price targets for the Company. Their price targets range from $10.00 to $15.50.
PAA closed at $9.24 on April 23.
Primarily due to the significant improvement in the macro business environment and rising demand for U.S. crude oil and NGLs, I have raised my valuation of PAA by $2.25 to $14.25.
> The Company has completed a multi-year capital program that sets of many years of strong operating cash flow.
> PAA now has a well-funded unit repurchase plan that will reduce outstanding units of PAA and shares of PAGP. Significantly reduces downside risk.
> DCF coverage is now more than 2X the current dividends of $0.72 (annual yield of 7.8%)
> I expect PAA and PAGP to raise their quarterly dividends in 2H 2021.
> Pre-Pandemic PAA and PAGP were trading at over $30.

PAA is an MLP and PAGP is a C-Corp. They pay the same quarterly dividends.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 25581
Joined: Fri Apr 23, 2010 8:22 am

Re: Plains All-American Pipeline LP (PAA & PAGP) Update - Ap

Postby dan_s » Mon Apr 26, 2021 9:44 am

My updated profile for Plains All American Pipeline has been posted to the EPG website. Today, my valuation is $12.00.

There are two ways to invest in this one. PAA is a Master Limited Partnership (MLP) and the General Partner (PAGP) is a C-Corp. Investors in PAGP do not get a K-1. Most of PAA’s distributions are treated as return of capital (non-taxable until you sell the units). PAA offers slightly higher annual yield. PAA and PAGP pay identical quarterly dividends of $0.18/share for annual yield of approximately 7.7% based on today's opening share price.

Based on the Company's guidance, PAA should be generating strong Distributable Cash Flow (DCF) this year and I expect them to raised their quarterly cash distributions in 2H 2021. If their Q1 results confirm my forecast, my valuation will increase to $14.25.

PAA will release Q1 2021 results on May 4.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 25581
Joined: Fri Apr 23, 2010 8:22 am


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