Plains All American Pipeline, L.P. (PAA)‘s asset base and its plan to spend over $1 billion on organic growth projects this year alone show future distribution growth potential of up to 10% CAGR over the next couple of years, says Elvira Scotto, Director at RBC Capital Markets.
“Plains has a well-positioned asset base. Its footprint covers many of the growing oil plays, including the Permian basin, the Bakken shale, the Mississippian Lime and others. Plains has exposure to the strong crude oil logistics environment, and given its well-positioned asset base, its supply and logistics business should continue to generate strong margins as North American crude oil production grows,” Scotto said.
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Scotto sees above-average distribution growth potential for PAA, as the company has plans to spend over $1 billion on organic growth projects this year, cementing Plains as one of Scotto’s top MLP picks.
“We believe this provides visibility into future distribution growth potential. We’re expecting about 8% to 10% distribution CAGR over the next couple of years for Plains,” Scotto said.
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