BofA Upgrades Plains All American Pipeline on Rising U.S. Oil Exports

This post was originally published on this site

A BofA analyst upgraded oil stocks Plains All American Pipeline (NASDAQ:PAA) and Plains GP Holdings (NASDAQ:PAGP) in a note to investors on Tuesday.

PAGP owns a non-economic controlling general partner interest in PAA and a limited partner interest in PAA.

The analyst lifted the ratings on the stocks to Neutral from Underperform, explaining that they are making the move after a pullback in the share prices.

“Rising U.S. oil exports should be a positive for PAA, as its Permian long-haul pipes have the most leverage to Corpus Christi, which has emerged as the primary U.S. crude export hub,” said the analyst. “But, at this point, we think it is difficult to say which is the major driver of U.S. exports–significant SPR releases (temporary), lack of US refining capacity (structural), or energy security concerns of int’l buyers of US oil that are shunning Russian oil (undetermined timeframe).”

The analyst said they are less concerned about gas takeaway constraints limiting oil volumes in 2023, as the midstream industry successfully navigated the issue in 2019.

“Overall, we now generally think the worst is behind PAA and, if a major recession is avoided, then it is possible operating leverage could build for the company over the next 1-2 years as Permian oil continues to grow, Cushing inventories refill at some point, and Corpus becomes a bigger U.S. crude export center.”

PAA shares rose 2.5% Tuesday, while PAGP gained 3%.