We are decreasing our fair value estimate, and caution investors to be prepared for further volatility.
By Stephen Simko, CFA | 08-28-16 | 06:45 PM | Email Article

 Plains GP Holdings  reported second-quarter adjusted EBITDA of $461 million, down 5% versus $486 million in the first quarter of 2015. Plains GP Holdings elected to hold its first-quarter 2016 distribution per Class A share at $0.231, unchanged from first-quarter 2016, and 2% higher than second-quarter 2015. Results were due to a combination of better performance (year-on-year increases in segment profits of Transportation and Facilities segments, offset by declines in Supply and Logistics segment), inclusion of deficiency payments from take-or-pay contracts, and timing related benefits that are expected to reverse later in the year.

Stephen Simko, CFA, is director of energy equity research for Morningstar.

Plains is doing its best to survive through the energy downturn. The capital expenditure budget is funded for all of 2016 and some of 2017, thanks to management's perpetual preferred issuance issued earlier in the year. Committed liquidity currently stands at $3.8 billion. Also, management expects to raise $500-$600 million this year from noncore divestitures.

Still, after incorporating the financial and operating results from the period we are decreasing our fair value estimate for Plains GP Holdings to $8 per share, and caution investors to be prepared for further volatility in Plains GP Holdings share price or possible declines if market conditions worsen at Plains All American or Plains GP Holdings.

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Stephen Simko, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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