Please ensure Javascript is enabled for purposes of website accessibility

Shares of Plains All American Slide on Weak Earnings Results

By Tyler Crowe - Feb 9, 2016 at 2:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As if investors in Plains weren't nervous enough after a year of declining share prices, last night's earnings release was enough to push a large chunk of them over the edge.

What: Shares of Plains All American Pipeline (PAA 2.12%) 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 (PAGP 2.73%) 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

PAA data by YCharts.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Plains All American Pipeline, L.P. Stock Quote
Plains All American Pipeline, L.P.
PAA
$10.13 (2.12%) $0.21
Plains GP Holdings, L.P. Stock Quote
Plains GP Holdings, L.P.
PAGP
$10.55 (2.73%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.