Plains All-American Pipeline LP
Plains All-American Pipeline LP (NYSE:PAA) makes its money via storage, terminalling and marketing of crude oil and other energy products. But the biggest competitive advantage to this company is its partnership with top players in shale oil fields. From the Permian Basin to the Bakken Shale to Eagle Ford and Mississippian Lime, Plains is connected to them all.
Of course, while Plains All-American does not produce oil and is not exposed directly to commodity prices, it’s worth noting that the more costly nature of shale oil (as opposed to more easily extracted oil from conventional wells) can severely limit production from these regions. If oil prices are too low — below $80 or so — producers are basically breaking even on their output, so there’s no incentive to pump like crazy. Thus less fuel flows through PAA distribution facilities, resulting in lower revenue.
However, that risk hasn’t been a factor as of late as crude prices have remained firm. Consider that PAA is up 45% in the last 12 months on share price alone!
And on the income side of things, Plains has raised distributions 15 quarters in a row (accounting for a recent split) and hasn’t seen a quarter-over-quarter reduction in over 12 years, dating back to early 2000.
If crude oil demand increases and if prices firm up, boosting shale oil production, the numbers could be even more impressive in the years to come.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.