What: Shares of Plains All American Pipeline (NYSE:PAA) are down more than 13% as of 12:30 p.m. EST after reporting earnings after hours yesterday -- and investors weren't too pleased. Consequently, shares of Plains GP Holdings (NYSE:PAGP) are also down 25% at the time of this writing.

So What: Shares of Plains have been on a dismal run during the past several months. Investors have been jittery about master limited partnerships as of late, and the company's current financial situation hasn't exactly been a confidence booster. 

PAA Chart

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I'm sure there were some investors who were looking for a reason to get out of their Plains position, and this past quarter's results were just that reason. EBITDA and distributable cash flow came in down 24% and 8%, respectively, compared to this time last year.

While some of its business segments held Plains up, the supply and logistics segment really dragged the company down. This is the part of the business that has oil-gathering assets, and it has been the most sensitive to declining production. The decline in distiributable cash flow puts the company's distribution coverage ratio at an alarming 0.88 times. Plains GP Holdings' sole asset is owning shares and distribution rights to Plains All American Pipeline.

Now What: The company says that it doesn't have any current capital needs because it was able to execute that $1.5 billion preferred-share issuance to private buyers back in January. So it won't have to tap the debt or equity markets any time soon. That's certainly a relief, because selling new equity would be prohibitively expensive, and its debt load is already looking a little bloated. Right now, shares are priced for a considerable dividend cut from both entities, and chances are we will get it soon enough unless we see a significant recovery in the company's ability to generate cash flow.

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