Third quarter 2010 earnings, on an adjusted basis, for Plains All American Pipeline L.P. (PAA) came in at 70 cents per unit, beating the Zacks Consensus Estimate of 63 cents and at the higher end of the company’s guidance. Results in the quarter also compare favorably with last year’s earnings of 59 cents per share.
Operational Results
Plains All American’s net revenues of $6.4 billion in the reported quarter outdid the Zacks Consensus Estimate of $5.9 billion by $0.5 billion. Revenues in the quarter also rose 32% from $4.9 billion reported in the third quarter of 2009.
In the quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose $30 million to $264 million from the prior-year quarter EBITDA.
Strong revenue growth was largely offset by increased expenses in the quarter. The company’s costs & expenses aggregated $6.3 billion, representing a 34% hike, primarily due to purchases and related costs (up 35.2% year over year) and field operating costs (up 8%).
Plains’ adjusted net income was $140 million, up 22.8% from the year-ago earnings of $114 million. On a GAAP basis, including one-time items, the partnership reported net earnings of $81 million (28 cents per unit) compared with $122 million (65 cents per unit) earned last year.
The Partnership’s weighted average units outstanding at quarter-end totaled 137 million compared to 131 million in last year’s second quarter.
Segmental Results
On a segmental basis, the company reported revenues of $6.2 billion (up 35%) for the Supply & Logistics segment, $265 million (up 6%) for the Transportation segment and $127 million (up 30.9%) for the Facilities segment.
Adjusted earnings at Plains All American’s Transportation segment climbed 5% due to higher volumes, favorable foreign exchange rates and higher pipeline loss allowance revenue partially offset by higher operating and general and administrative expenses. Earnings for the Facilities segment rose 27% due to acquisitions and organic growth. However, the Supply & Logistics segment posted a 30% increase in earnings, attributed to more favorable market conditions.
Financials
As of September 30, 2010, the partnership’s balance sheet was strong. Plains had a long-term debt of $4.6 billion, including $500 million for hedging activity; and an adjusted long-term debt-to-total capitalization ratio of 49%. Total debt at quarter-end was $5.49 billion.
The partnership declared a quarterly distribution of 95 cents per unit ($3.80 per unit on an annualized basis), reaching its annual distribution target for 2010. The distribution representing a 3.3% year over year growth, is payable on November 12, 2010.
Outlook
Fourth quarter adjusted EBITDA is expected to range from $275 to $300 million, with adjusted earnings ranging from $150 to $181 million (76 – 98 cents per unit). For fiscal 2010, the company expects adjusted EBITDA in the $1.059 – $1.084 billion range and adjusted earnings in the $557 – $588 million ($2.80 – $3.02 per unit) range.
The company forecasts total capital expenditure in the range of $465-$470 million for 2010, including nearly $380 million for expansion projects and roughly $85-$90 million for maintenance capital projects.
Looking forward, the partnership is expected to remain well positioned to continue to deliver meaningful long-term growth to unitholders. Recently, the company announced several organic growth projects, estimating 2011 expansion capital program to range from $500 to $600 million, an increase of 45% over the partnership’s 2010 capital program.
