Stephens Inc. MLP Analyst Matt Schmid says Plains All American Pipeline, L.P. (PAA) is likely to be acquisitive in the current environment. He says the company is investment-grade rated, has a very low cost of capital and a great asset footprint.
“They made a small acquisition of a Williston crude oil terminal that they announced earlier this week,” Schmid says. “They also had a couple of nice project announcements, and with their asset footprint they’re ones that really can take advantage of companies in more stressed positions, being able to pick up assets over the course of the year. This week they also announced a partnership with Magellan (NYSE:MMP) for the Saddlehorn pipeline from the DJ Basin to Cushing.”
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Schmid says Plains also has a great management team. He says they recently reset guidance to $50 average oil for this year. He says he thinks Plains will still do about 6.5% distribution growth this year.
“They’ve got a strong project backlog. They’re close to 80% fee-based on their cash flows,” Schmid says. “Their core growth business is the pipeline transportation business; I think that’s still going to grow over 20%, 25% this year, so the core business remains very strong.”
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