Earnings Preview: Plains All American Pipeline

Midstream companies have grabbed investor attention recently, and for good reason. Oil and gas production volumes have increased across America, resulting in a massive build-out of midstream infrastructure and a ton of acquisitions.

Plains All American Pipeline (NYSE: PAA  ) reports earnings on Wednesday. The midstream company has been pretty busy over the past few months and there should be plenty of material to pour over in the third-quarter release. Here are three things to watch for when Plains reports.

1. Distributable cash flow
Plains has already announced it will increase fourth-quarter distributions to $0.5625 per unit. This represents a 9.8% increase over last February's distribution, and a 3.7% increase over the distribution paid just last quarter.

Beyond that, management announced that Plains' strong fiscal shape allows it to increase its 2013 targeted distribution growth from 7%-8% to 9%-10%. While this news doesn't guarantee another knockout quarter for Plains, it certainly hints at it. Last quarter, the partnership reported $360 million in distributable cash flow. Expect that number to climb.

2. Segment performance
Plains' management is very clear every quarter about what they expect for the next quarter. Management expects its supply and logistics segment to benefit from crude oil differentials and a seasonal boost in natural gas liquids demand; the transportation segment to perform in line with third-quarter results, generating around $192 million; the facilities segment to come in slightly below its third-quarter performance.

In general, management tends to be conservative in its guidance, and though it is not always right, it is not typically off by much. In some cases, as we saw last quarter, volume guidance may come in low, and revenue for that particular segment may finish higher anyway. The most crucial segment is supply and logistics, and all signs point to a strong performance this quarter.

3. Forward progress
Plains picked up several key assets over the last few months, including a $500 million deal for rail terminals, and $125 million for Chesapeake Energy's (NYSE: CHK  ) Eagle Ford crude oil and condensate gathering system. Look for management to relay information about the integration of these assets. For example, four out of the five rail terminals are existing facilities, but the fifth is still under construction. I'd like to hear a target completion date, and an update on customer agreements for all five terminals.

Foolish bottom line
Analysts are expecting earnings of about $0.77 per unit and revenue of $10.79 billion. Last quarter, analysts anticipated earnings per unit of $0.55, but actual (non-GAAP) earnings came in much higher at $0.73. Plains reports after the market closes on Wednesday, with its conference call scheduled for 11:00 a.m. EST, Thursday Feb. 7. Interested investors can listen here, or click here to add Plains All American Pipeline to My Watchlist.

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