Units of MLP Plains All American Pipeline (PAA -0.85%) rallied 27% in November, according to data provided by S&P Global Market Intelligence. Several factors fueled the energy stock's big-time rally last month.
Plains All American got November off to a good start by reporting stronger-than-expected third-quarter results. While the company's Adjusted EBITDA declined by 7% year over year, its distributable cash flow per unit was even with the prior-year period. Meanwhile, both numbers improved significantly compared to the second quarter when crashing crude prices impacted the volumes flowing through its pipeline systems. As a result of that bounce-back quarter and what it sees ahead in the fourth-quarter, Plains All American boosted its full-year Adjusted EBITDA outlook by 3%. That put it back in line with its pre-pandemic forecast.
Plains All American also delivered solid progress on its strategic plan during the quarter. The company and its partners completed the main section of their Wink-to-Webster oil pipeline in Texas at the end of October. As a result, it should start shipping oil in the fourth quarter, with additional segments coming online throughout 2021. Plains All American also completed another asset sale, bringing its total to roughly $450 million for the year.
With market conditions rebounding and the pipeline company making progress on its strategic plan, it has growing confidence in its future cash flows. Because of that, Plains All American has the flexibility to return more cash to investors. It's doing that via a $500 million unit repurchase program that it unveiled last month.
Despite November's big rally, units of Plains All American are still down roughly 47% on the year. Because of that, the company trades at a ridiculously low valuation, which is leading it to launch a unit repurchase program. Add that upside potential to the company's 7.4%-yielding dividend, and Plains All American Pipeline could produce compelling total returns if the oil market continues improving in the coming quarters.