Plains All American Pipeline, L.P. (NYSE:PAA) — This master limited partnership (MLP) is engaged in the transportation, storage and marketing of crude oil, natural gas and natural gas liquids (NGL) in the United States and Canada. It is well positioned in the major oil-producing regions of the Bakken, Eagle Ford and Permian basins.
S&P Capital IQ said Plains All American Pipeline is one of the best-positioned MLPs to benefit from the significant increase in crude oil production in the United States and supply/demand imbalances. Its analysts also said they believe the company’s NGL pipelines are capable of moving heavy oil from Canada to the Gulf Coast. They note the potential costs of integrating acquisitions and further cuts in oil and natural gas prices as the most significant risks.
Capital IQ raised its 2015 EPS estimate by $0.23 to $3.04, up from $2.38 in 2014, and projects that distributions will rise 9.6% in 2015 to $2.85 per unit. Its 12-month price target for PAA stock of $62 is based on a historical average EV/EBITDA of 11.7.
From a technical viewpoint, PAA stock is at the beginning of what could evolve into a significant intermediate-to-long-term advance. The stock broke from a modified “W” formation accompanied by high volume. The breakout was through an intermediate-term bearish resistance line and the 50-day moving average, and was supported by a MACD buy signal.
Insignificant, low-volume profit-taking occurred immediately following the breakout. A follow-through with higher-volume buying should move shares to their first barrier, which is the initial resistance at the 200-day moving average at $55.50.
Buy PAA stock at the market with a six-month objective of $62, which is more than 20% above current prices. Investors may want to hold PAA stock as a quality investment in the pipeline MLP sector.
