Plains Earnings: More Distribution Increases and Bolt-On Deals Sounds Good To Us

Plains’ third-quarter results were very good, as it boosted its 2023 guidance to just over $2.6 billion compared with earlier expectations of about $2.5 billion. The main drivers of the increases were not the two recent bolt-on deals, as they are contributing about $10 million to $15 million or so to the improved outlook, but higher levels of tariffs. Permian volume guidance actually declined a bit for 2023, as it was impacted by the very hot weather in August that impacted gas processing and field compression in the Permian basin. After updating our model, our fair value estimate increases to $16 from $14 per share for both Plains entities, reflecting its improved cost structure. Our nomoat rating is unchanged.