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Plains All American -15% as Q2 weighed by supply and logistics weakness

  • Plains All American Pipeline (NYSE:PAA) -14.7% premarket after missing Q2 earnings expectations and reducing earnings guidance.
  • PAA posted Q2 adjusted EBITDA of $451M, down 12% from $512M in Q1, as results again were hurt by the supply and logistics business, which came in weaker than anticipated due to crude oil and natural gas liquids marketing activities; largely because of S&L weakness, PAA lowered its FY 2017 EBITDA outlook to $2.08B from previous guidance of $2.26B.
  • In its earnings conference call, PAA provided a number of initiatives to improve its outlook including a review of the current distribution policy; presentation slides suggested a potential distribution cut to $1.80.
  • Both PAA and Plains GP Holdings (NYSE:PAGP) are downgraded to Neutral from Outperform at Baird, which notes the potential evaporation of $400M in annual EBITDA in 2018 based on preliminary guidance of a wide $100M-$300M range in S&L from the previously "normalized" level of $500M.
  • Baird wonders if there's another shoe to drop on re-contracting; it says it cannot be sure without granular disclosure, and management has exhausted its credibility; the firm thinks a bottom-up, pipe-by-pipe disclosure is critical for PAA to recover some investor confidence (source: Briefing.com).

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Plains All American Pipeline, L.P. Common Units