- Plains GP Holdings was heavily impacted by the oil price downturn of 2020 with their operating cash flow still forecast to be down during 2021.
- Thankfully, with oil prices now recovering, it should foretell higher earnings on the horizon, which should also pave the way for deleveraging and thus higher distributions.
- Almost all of their revenue and thus earnings come from their supply and logistics business segment, which has its results tethered to oil prices.
- It appears that the oil market is rebalancing and thus it should allow for their earnings to recovery back towards their level during the broadly normal operating conditions of 2018-2019.
- This will push down their leverage and give management the ability to ramp up distributions, which I believe makes it appropriate to upgrade my rating to bullish.
For further details see:
Plains GP Holdings: The Oil Price Recovery Foretells Higher Earnings And Distributions On The Horizon