PAA updates on asset sales, expands Canadian NGL business

Plains All American Pipeline LP (NYSE: PAA) has provided an update on its 2016 planned asset sales and on the company’s agreement to acquire natural gas liquids (NGL) assets complementary to its existing operations in Canada.

In January, PAA announced its plans to sell $200–$400 million in non-core assets during 2016. On March 31, PAA completed two transactions for $250 million. Five additional transactions totaling $250 million are either under contract or in advanced stages of negotiation and are expected to be consummated in the second quarter of 2016. PAA is also evaluating additional non-core assets sales and currently expects that total asset sales for 2016 will range from $500 million to $600 million.

PAA also announced that its indirect subsidiary, Plains Midstream Canada ULC (PMC), has entered into a definitive agreement with Westcoast Energy Inc., a unit of Spectra Energy, to acquire its Canadian NGL business for a cash purchase price of C$200 million (US $150 million).

The transaction includes Westcoast’s Canadian NGL integrated system of assets, consisting of the Empress NGL extraction and fractionation facility; the PTC transmission pipeline; seven NGL terminals; and two NGL storage facilities in Western Canada, which include 2.4 billion cubic feet per day of NGL extraction capacity and 63,000 barrels per day of fractionation capacity at Empress, as well as 4.7 million barrels of NGL storage.

The transaction is expected to close during the second quarter of 2016.

In a note on Tuesday to investors, Deutsche Bank analysts said that the updates will likely be viewed as neutral by the market. “On one hand, the non-core asset sales update will probably be viewed as a slight positive, as it demonstrates forward progress on its strategic plans of avoiding accessing the capital markets for at least the balance of the year (no equity through CY16/17, no debt through CY16), while still funding its remaining ($1.5 billion for CY16) major growth projects," the analysts commented. "On the other hand, the acquisition is probably a little confusing as it adds more cash flow risk at a time when PAA is trying to stabilize its business. However, management did note of some potential operating efficiencies and commercial synergies, although did not quantify it – we look for more info on the 1Q16 earnings call.”


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