Plains All American Pipeline (NASDAQ:PAA) and Plains GP Holdings (NASDAQ:PAGP) are both lower in Monday's trading despite winning upgrades to Buy at Stifel with $16 price targets, raised from $14, citing Plains' improving balance sheet and increased confidence in higher volumes.
Plains (PAA) reported better than expected Q2 results and raised full-year EBITDA guidance by $100M to $2.375B, as it utilized a higher commodity price environment to outperform expectations in its natural gas liquids segment due to higher frac and basis spreads as well as higher volumes on its NGL pipelines and fractionation operations, according to Stifel analysts led by Selman Akyol.
"As one of the largest transporters of Permian crude, Plains shuld be well positioned to capture incremental volumes over the next several years, [and] Plains' joint venture with Oryx "should allow for additional secured barrels to flow on PAA's long haul pipes longer term," the Stifel team said.
Stifel expects Plains (PAA) will continue to "generate significant free cash flow, which will aid in returning incremental capital to stakeholders."
Seeing better long-term prospects for firms focused on natural gas and natural gas liquids than Plains' (PAA) oil-centered infrastructure assets, Wolfe Research recently downgraded Plains and Plains GP.