Plains All-American Pipeline LP (PAA & PAGP) - Mar 4

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

Plains All-American Pipeline LP (PAA & PAGP) - Mar 4

Post by dan_s »

PAA is going to generate a significant increase in Distributable Cash Flow this year and through the rest of this decade, primarily because they have completed a lot of midstream capital projects. Higher Operating Cash Flow & Lower CapEx = more cash to pay out to unit holders.

PAGP is in our High Yield Income Portfolio. PAGP's dividends are identical to PAA's quarterly cash distributions. PAA is an MLP and PAGP is a C-Corp.

For both companies, Q4 dividends were increased by $0.05 to $0.2675 or $1.07 per year.

Per PAA (slide 23 of their recent presentation): "After 2023, PAA is targeting ~$0.15/unit annual distribution growth until distribution coverage declines to ~160% of DCF"

Based on PAA's guidance, they should generate over $1.6 billion of free cash flow in 2023. They plan to use $600 million to pay down debt and have over $1 billion (~$1.45/unit) for distributions or unit buybacks. DCF should be approximately $2.50, compared to $2.26 in 2022.

My valuations increase to $17.35 for PAA and $18.00 for PAGP. < PAGP closed at $14.08 on March 3

My updated forecast/valuation model for PAA has been posted to the EPG website.
Dan Steffens
Energy Prospectus Group
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