On an annual basis, Plains All American now pays $2.80 per common unit and Plains GP pays $0.924 per Class A common share. The new distributions are payable on November 13, 2015, to holders of record at the close of business on October 30.
According to the announcement, this is the 44th of the 46 most recent quarters for which Plains All American has increased its cash distribution and the 25th consecutive quarter to see an increase.
In late August, Plains All American sold $1 billion in 4.65% senior unsecured notes due in 2025 and plans to use the proceeds to repay borrowings on its commercial paper and for general partnership purposes.
When Plains reported second-quarter results in early August, the CEO warned that 2016 distribution growth may be in jeopardy. The company has targeted cash distribution growth of around 7% for 2015, but its distribution coverage ratio for 2015 is below 1:1. To continue growing cash distributions at that rate, Plains would have to experience a further negative distribution coverage ratio in 2016. That means Plains would not meet its excess coverage goal of 105%.
Add to that the May pipeline spill in California that fouled Santa Barbara beaches with as much as 100,000 gallons of crude oil. The federal pipeline regulator has not proposed a fine on the company, but said in mid-September that Plains kept poor records on emergency training and how it planned to protect the coastline in the event of a spill. The regulators also issued six proposed violations from inspections conducted before 2013, and one of the lines included in those inspections is the one that ruptured in May.
Common units of Plains traded up nearly 2% Wednesday morning, at $33.57 in a 52-week range of $26.71 to $57.30. The consensus price target on the partnership units is $44.12.
Plains GP shares traded up about 2.3%, at $19.14 in a 52-week range of $16.28 to $29.87. The consensus price target on the shares is $23.38.
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