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Plains All American Pipeline (NASDAQ:PAA) (NASDAQ:PAGP) -2% in Monday’s trading as Credit Suisse downgraded units to Neutral from Overweight with a $14/unit price target, expecting lower natural gas EBITDA and the potential for 2023 Permian oil growth to fall short of the bull case.
Plains (PAA) posted better than forecast Q3 EBITDA of $623M, and maintained expectations of greater than 600K bbl/day exit-to-exit growth going into 2023, but Credit Suisse said its E&P team estimates a total 367K bbl/day Permian crude oil production Y/Y increase in December 2023, “a level that might disappoint the bull PAA thesis.”
In Plains’ (PAA) long awaited capital allocation update, the MLP elected to raise its distribution run-rate by $0.20/unit, and Credit Suisse said it would have liked to see a plan to raise cash to retire its Series A and B preferred securities in the near term, rather than just lift the distribution.
Factoring in lower natural gas liquids EBITDA expectations as well as the potential for 2023 Permian growth to fall short of more bullish expectations, Credit Suisse sees a more balanced risk/reward profile and thus a downgrade.
Plains All American (PAA) (PAGP) has a nearly 8% dividend yield and is guiding to aggressive raises as its debt hits targets, The Value Portfolio writes in an analysis published recently on Seeking Alpha.
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