Invest in Plains all American Pipeline

Plains All American Pipeline (NYSE: PAA), is ready to feed our insatiable appetite for energy. Despite our best efforts to promote conservation, what we really want is more. As Plains All American Pipeline, headquartered in Houston, Texas and publically traded on the NYSE under PAA, announced in its December 1, 2011 conference call, they are positioning themselves to give it to us from crude oil to liquefied petroleum gas. PAA ranked at 99 (previously ranked 128) in 2011 by Fortune 500.

PAA’s business units fall into three primary areas: Transportation, achieved through pipelines, trucks and trailers, and transport barges and tugs; Facilities that provide fee-based services for storage and terminaling of crude oil, refined products, natural gas, plus LPG fractionation and isomerization services; Supply and logistics of the purchase, transportation and resale of energy products. The company also has a majority (62%) interest in natural gas in its subsidiary PAA Natural Gas Storage, L.P. (NYSE: PNG).

PAA has increased distribution of cash to unitholders by 7 percent over 2011’s distribution last February. Distribution of 1.025 per unit will be payable February 14, 2012. The company has shown increases in 29 of the last 31 quarters.

In the company’s conference call December 1, 2011, PAA discussed recent acquisitions that are expected to position the company for increased growth in 2012. An agreement was signed in October to acquire Velocity South Texas Gathering. This will incorporate 120 miles of pipeline with a capacity of 150,000 barrels per day. Terminal storage facilities in Gardendale and Catarina add an aggregate capacity of 185,000 barrels of storage capacity. PAA plans to expand the storage capacity by 100,000 barrels at the Grendale terminal facility.

Further storage facility expansion will be added through the acquisition of Western Refining’s Yorktown , Virginia refinery. This is anticipated to add 6.6 million barrel storage capacity to PAA’s portfolio. Additionally, in a separate agreement with Western Refinery, PAA will add an 82-mile stretch of pipeline in New Mexico. Once upgraded, the pipeline will move 100,000 barrels a day from New Mexico to the Texas pipeline systems.

PAA has signed an agreement to acquire BP’s (NYSE:BP) LPG and NGL assets in Canada, plus a portion of BP’s assets in the United States. This acquisition will position PAA as a large supplier of NGL in North America.

PAA raised approximately 1.3 billion in equity in 2011 and has an excess cash flow of $300 million. Funding sources for the announced acquisitions include long-term debt of $1.23 billion, $300 million in short-term debt partially funded by seasonal inventory from the BP acquisition, $400 million in liquidation of equity funded inventory, and $386 million raised by a public offering of common units. 

PAA has targeted that the growth in distributions to unit holders will be around 8-9 percent above the previous level in November 2010. General Partner owners have agreed to reduce their incentive payments for the fourth time to support the acquisitions and allow for greater distributions to unit holders.

One proposed acquisition was not up for discussion. The previously disclosed proposal to acquire SemGroup (NYSE: SEMG), which could add mid-continent and the Rocky Mountain regions to the copmany’s overall portfolio. Plains All American Pipeline (NYSE:PAA) made an unsolicited proposal to acquire all outstanding shares of SemGroup stock. SEMG rejected the proposal on the grounds that the offering price undervalued the company.

The company will announce its most recent earnings report to investor’s during a conference call and webcast on February 6, 2012. Overall, PAA is positioning itself to increase distribution and storage capacity in the LPG and NGL marketplace.