Plains All American Pipeline, L.P. – 7 Consecutive Quarters of Growth in Distributable Cash Flow

by Ron Hiram
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Submitted by Ron Hiram of Wise Analysis using our Trefis Contributors tool

In a prior article I presented the definition of distributable cash flow (DCF) used by Plains All American Pipeline, L.P. (PAA) and provided a comparison to definitions used by other master limited partnerships (MLPs). Using PAA’s definition, DCF has shown impressive growth. Indeed, this master limited partnership has reported an increase in DCF and DCF per unit in each of the last 7 consecutive quarters, as shown in the table below:

Period: 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10
Revenues 8,884 8,837 8,859 7,694 7,231 6,414 6,124 6,125
EBITDA 426 421 367 326 277 205 259 277
Adjusted EBITDA 471 414 366 348 322 264 248 272
Distributable Cash Flow (“Implied DCF”) 343 310 259 241 229 168 161 201
Weighted average units (millions) 154 150 150 144 139 137 137 137
DCF per unit $2.23 $2.07 $1.73 $1.67 $1.65 $1.23 $1.18 $1.47

Figures in $ Millions, except units and per unit amounts

To review a comparison of sustainable DCF (as I define it) to reported DCF for the period ending 9/30/11, click here. That report indicated for the 9 months ended 9/30/11 there were no significant differences between reported and sustainable DCF. It also pointed out that a significant surplus ($1,063 million) remained after deducting from net cash from operations: (i) maintenance capital expenditures; (ii) net income from non-controlling interests; and (iii) distributions. Even after taking into account that $785 million of the $1,063 million surplus is due to reduction in working capital, the remaining cushion was still sizable.

After the company provides additional cash flow information as part of its 10-K filing expected around February 25, I will report on sustainable DCF for the 12 months ended 12/31/11. Based on what I have seen to date, I do not see DCF sustainability as a cause for concern with respect to PAA.

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