Can Plains All American (PAA) Offset Capex Pressures with Shale Gains?

Plains All American Pipeline L.P. (NASDAQ:PAA) is one of the most undervalued and overlooked large-cap stocks. Considering the volatile energy price environment, a recently released report by Scotiabank reflected both the opportunities in natural gas exposure and the financial discipline required to balance growth against cost inflation.

On August 14, Scotiabank’s analyst Brandon Bingham cut his price target on Plains All American Pipeline L.P. (NASDAQ:PAA) to $18 from $19, but still reiterated an Outperform rating. He noted that Q2 earnings across the U.S. Midstream sector produced mixed results, with basin-level production growth slowing in some areas.

Despite that backdrop, the analyst highlighted that gas-levered names such as Plains All American Pipeline L.P. (NASDAQ:PAA) could still benefit from the inherent characteristics of shale wells and hydrocarbon streams. The key question, however, is whether these gains can offset rising capital expenditures, which risk eroding cash flows.

The lower price target by the analyst signals a more cautious stance, but his Outperform rating suggests confidence in the positioning of Plains All American Pipeline L.P.’s (NASDAQ:PAA) within the sector. Although the analyst sentiment is mixed, the consensus price target still indicates nearly 17% potential upside.

Plains All American Pipeline L.P. (NASDAQ:PAA) is a U.S. midstream energy infrastructure company that specializes in the transportation, storage, and marketing of crude oil and natural gas liquids, with operations spanning key producing basins.

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Disclosure: None. This article is originally published at Insider Monkey.