Tortoise in Barron's

Plains All American, Still Weak After Spill, Undervalued?

By Amey Stone
Units in master limited partnership Plains All American Pipeline (PAA) fell Monday, continuing a downturn that accelerated following the May 19 oil spill near Santa Barbara caused by a leak in one of its pipelines. The units closed at $45.36, a 1.4% drop, on Monday. Prior to the spill they were trading near $50.
A decline in the price of crude and general seasonal weakness in large-cap MLPs contributed to Monday’s decline, says Jay Hatfield, portfolio manager of InfraCap MLP ETF (AMZA). But he says investors have generally overreacted to the fall-out from the spill.
“It’s a negative for their reputation,” he says, “but it’s a very large corporation and this pipeline is not core to their operations.” He thinks the stock is trading about 10% below where it should be.
Rob Thummel, a portfolio manager at energy investment firm Tortoise Capital Advisors, which operates the closed-end fund Tortoise Energy Infrastructure (TYG), lists Plains among the firm’s top holdings, partly because of its backlog of new projects, plus its 6% yield and growing dividend. He said insurance will cover much of the cost of the spill and clean up.
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