Zacks_Analysts' Blog : Plains Public Offer of Common Units - Analyst Blog

Plains All American Pipeline, L.P. (PAA) announced that it has commenced the process of an underwritten public offering of 7.5 million of its common units representing limited partner interests. The partnership will allow the underwriters of the issue a window of 30 days to purchase up to 1,125,000 additional common units to cover over-allotments, if necessary.

The partnership intends to utilize the net proceeds of the issue, including proceeds from any exercise of the over-allotment option, for general partnership purposes. The partnership will utilize the balance to fund  pending and future acquisition, make capital expenditure and replenish any future borrowings under its credit facilities.

The partnership from time to time issues units to fund its capital requirements. In the first quarter of 2011, the partnership had issued 6.4 million common units and gave the underwriters a customary window of 30 days to purchase up to 960,000 common units to cover over allotment. The net proceeds of the issue including receipts from over allotment were $503 million and were used by the partnership to reduce outstanding borrowings under its credit facilities and for general partnership purposes.

Plains All American not only issued new units in fiscal 2011 but also returned value to unit holders, leveraging the partnership’s strong financial performance. The new quarterly distribution rate of the partnership is 99.5 cents per unit ($3.98 per unit annually).

The partnership ended third quarter 2011 with 150 million diluted outstanding units versus 137 million units at the end of the previous year.

Plains All American Pipeline currently retains a Zacks #1 Rank, which translates into a short-term Strong Buy rating. The partnership competes with Enterprise Products Partners LP (EPD) and  Sunoco Logistics Partners L.P. (SXL).

Houston, Texas based Plains All American Pipeline owns assets strategically located in well-established oil producing regions, catering to major U.S. refinery and distribution markets. Other than organic growth opportunities, the partnership also relies on acquisitions to spur growth.