PAA - Plains All American: A Buy Despite Recent Outperformance

2024-04-21 21:17:45 ET

Summary

• In the past 3 years, Plains All American has significantly outperformed its benchmarks and peers in the midstream energy/MLP market.
• This creates concern around PAA's valuation and further upside potential.
• Also, the massive hit in the early pandemic period could theoretically question the strength of PAA's financial and cash generation profile.
• In this article, I assess the key fundamentals of PAA and explain why I recommend a buy here.

Plains All American ( PAA ) is a relatively large-scale MLP with a market cap of just over $12.5 billion. It owns and operates midstream energy infrastructure based in the United States and to a lesser degree in Canada. The main segments are pipeline transportation and storage of crude oil and NGL, where the crude oil accounts for the lion's share of PAA's EBITDA generation. For example, the operations that are associated with crude oil explain roughly 89% of the guided EBITDA for 2024. Also, from the CapEx side, the bulk of proceeds is directed towards the crude, thus sending a clear signal that PAA's core business exposure is set to remain unchanged....

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