Credit Suisse On Plains All American: Plain, But Not Simple Yet

Credit Suisse's John Edwards reiterated

Plains All American Pipeline, L.P.PAA

Plains GP Holdings LP

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PAGP

's Neutral rating with price targets of $26.00 and $11.00, respectively.

"The main takeaway from PAA's investor day [...] was management's description of PAA's ongoing strategy of increasing integration and utilization of existing capacity," Edwards said.

The analyst was impressed with expectations to generate $1 billion by 2020 through "leveraging Plains' expansive footprint with little-to-no incremental capex." Of the $1 billion, $600 million was expected to come from the transportation and facilities segments, with $400 from supply and logistics, according to Plains All American's investor day.

Recovering Margins and Crude Prices

The analyst expected SL margins to begin to recover significantly in 2018 and thereafter, "due to increasing crude margins and [...] arbitrage opportunities." Edwards forecasted rising crude prices due to "supply cuts" and "+/- 1 mmb/d of annual demand growth."

The Credit Suisse analyst stated, however, that oil prices may stay lower than expected, depending on the "oil industry's ability to respond to this expected demand."