Plains All American Pipeline (PAA) recently agreed to acquire a 50% stake in PAA Natural Gas Storage (PNGS) from Vulcan Capital for $220 million. The deal will bring Plains total control over its natural gas storage business and related operating entities.

The transaction comprises $90 million cash disbursement, distribution of 1.9 million common units of PAA at $90 million and deferred cash consideration of up to $40 million, which is conditional upon achievement of certain performance targets over the next few years. The deal is expected to close by Sept. 3.

As of June 30, PNGS had around $450 million in debt and nearly $52 million of cash. PAA will pay off the outstanding project finance debt by using the unit’s cash and available credit line.

Management is optimistic about the near-term and long-term prospects of the natural gas storage business and sees the deal to be accretive to earnings immediately. Moreover, it sees the deal enhancing Plains’ strategic flexibility going forward with regard to organic as well as inorganic growth objectives.

The cash flows from the PNGS business are fee-based and largely committed under long-term contracts running up to ten years. Plains continues to expand storage capacity at its Pine Prairie facility to boost cash flows from this division.

Plains closed at $47.25 on Friday, generating a distribution yield of 7.7% versus 7.0% of the peer group. We maintain our Neutral recommendation for the partnership.

Zacks Investment Research
View original at: Zacks.com News Feed

1. ($XTO) EIA-Reported Supply Glut Pressuring Natural GasIn its weekly release yesterday, the Energy Information Administration (EIA) reported a bigger-than-expected 54 billion...
2. (PTR) PetroChina to Begin Building a Natural Gas Plant in Inner MongoliaPetroChina Company Ltd. (PTR) has discovered solid gas flow at an onshore well in the...
3. (XTO) Natural Gas Continues to BuildYesterday, in its weekly report, the Energy Information Administration (EIA) said that natural gas inventories...
4. ($PSA) Public Storage Posts Modest Q2 – we maintain our Neutral recommendationPublic Storage, Inc. (PSA), a leading real estate investment trust (REIT), has reported relatively modest...
5. (EPB) El Paso Pipeline Partners L.P. – Value – Zacks Rank BuyEl Paso Pipeline Partners L.P. (EPB), a limited partnership that operates natural gas transportation pipelines...
6. (EPB) El Paso Pipeline Partners L.P – distribution increase continues our history of raising full quarter distributionsEl Paso Pipeline Partners L.P. (EPB), which operates natural gas pipelines Incorporatedreased its cash distribution...

Search Posts by Tag: PAA | Plains All American Pipeline L | Basic Materials | Oil & Gas Pipelines

RSS Feeds by Tag: PAA | Plains All American Pipeline L | Basic Materials | Oil & Gas Pipelines |

Other Posts by: vitalstocks | RSS Feed for this author