Plains All American: Export Growth Crucial Amid Softening Prices

Plains All American's export operations are critical to its business, but prices for its products are soft. The energy sector, including midstream operators like Plains All American, has not been favored by Wall Street investors. Investment funds have decreased their exposure to energy stocks.

Plains All American (PAA), a prominent midstream operator, has seen its export operations face soft prices for its products, a trend that reflects broader challenges in the energy sector. Despite the resilience of oil production volumes, particularly in Texas, where PAA has a significant pipeline network, the company has experienced mixed fortunes.

The energy sector, including midstream operators like Plains All American, has been out of favor with Wall Street investors. Investment funds have decreased their exposure to energy stocks while increasing their hedging with gold, according to a Seeking Alpha analysis. This shift is despite the fact that commodities, including oil and gas, typically perform well during stagflation conditions. The US oil production in the first half of 2025 increased by approximately 1.5% year-over-year, with Texas, a key region for PAA, contributing significantly to this growth, the Seeking Alpha article noted.

However, PAA's stock performance in the first half of 2025 has been relatively stable. Adjusted EBITDA from continued operations stood at $1.125 billion, essentially flat year-over-year, while the crude segment delivered an Adjusted EBITDA of $1.14 billion, the Seeking Alpha piece reported. The company has maintained its full-year 2025 EBITDA guidance of $2.8 - $2.95 billion, although it noted that it would fall at the lower end of this range, according to the same article.

The company's valuation remains attractive, with a 9% distribution yield on PAGP and 9.5% on PAA. This yield is supported by the expected capital recycling from the sale of the NGL segment to Keyera, which is expected to close in Q1'26, the Seeking Alpha analysis added. PAA's modest leverage compared to its peers and its reduction in the Debt-to-EBITDA ratio over the past five years also contribute to its favorable valuation, the article observed.

Despite these positives, there are risks to consider. The main concern is a potential capacity supply glut that could impact PAA's ability to secure favorable contracts for its pipelines. Recent contracts for Cactus I and Cactus II, for instance, were secured at lower rates, reflecting competitive trends noted in the Seeking Alpha article.

In conclusion, while Plains All American faces challenges due to soft prices and broader sector trends, its stable performance and attractive valuation make it an interesting option for investors. The company's focus on dividend coverage and earnings stability, along with its critical role in the energy infrastructure, offers a compelling investment case.