Plains All American raises $1.5 billion from private equity firms, calms investor

(Reuters) — Plains All American Pipeline LP said on Tuesday it has secured $1.5 billion in new financing from private equity firms, aimed at easing investor fears that the U.S. midstream company would cut shareholder payouts amid slumping crude oil prices.

The private equity firms paid a 20 percent premium over the company’s 20-day volume weighted average share price, providing more money than a traditional equity offering and showing the sector has more confidence in Plains All American than other investors.

Primary purchasers include affiliates of EnCap Investments LP, EnCap Flatrock Midstream, The Energy Minerals Group, Kayne Anderson Capital Advisors LP and First Reserve Advisors LLC.

“Public MLP equity markets, in particular, are even more distressed, as the fundamental MLP financing model is being questioned or challenged,” Plains All American Chief Executive Greg Armstrong said on a conference call Tuesday.

The new financing means the company will not need to access equity capital markets in 2016 or 2017, Armstrong said. It also eased fears the company would not be able to maintain its 70 cents per unit distribution.

Plains All American is among the largest midstream companies in the United States, with pipelines and storage terminals in key shale plays that have scaled back operations due to the collapse in oil prices.

Plains All American’s stock price plummeted in the past year, from a year-high of $52.70 in February to $17.83 last month, as the crude oil rout took a toll on all master limited partnerships. MLPs collect fees on the movement of oil and refined products through pipelines, ships and storage tanks, and are touted as immune from volatile energy markets.

Shares of the company rose 7.2 percent to $21.82 on the New York Stock Exchange late Tuesday afternoon.


Plains All American’s 2016 financial projections assume oil prices starting the year at around $35 per barrel and increasing to $60 a barrel, with an average of around $47.50.

The company expects U.S. production to decrease steadily throughout the year, but the drop-off will vary by region. The Eagle Ford, Mid-Continent and Williston shale plays will decline, while Permian and Niobrara are expected to be flat to slightly up, the company said.

In 2017, the company expects oil prices of $65 to $70 per barrel, an a pickup in producer activity throughout the year. Output will increase throughout 2017, but with growth at about half the rate in 2014.