BofA Securities downgraded Plains All American (PAA) from Neutral to Underperform while holding its price target at $19.00. The stock is trading near $19.55, with a reported P/E ratio of 18.9 and a relative strength index that the firm characterizes as being in overbought territory.
In a note explaining the move, BofA analyst Jean Ann Salisbury highlighted concerns about the long-term trajectory of oil production in the Permian Basin. The note projects Permian output will level off and then enter a decline in the 2030s, a dynamic the bank says will make it difficult for Plains All American to secure a higher valuation multiple.
That view is reflected in a PEG ratio of 2.33, which BofA points to as an indicator that the stock’s current P/E is high relative to expected growth. The firm expects Plains All American’s EBITDA to remain essentially unchanged at roughly $2.6 billion through the decade, compared with approximately $2.75 billion on a last-twelve-months basis.
BofA also raised operational concerns tied to takeaway capacity. The research note calls out an overbuild of natural gas liquids pipelines, which, in the bank’s view, removes an "escape valve" that might otherwise relieve crude oversupply and support higher realizations or utilization for midstream assets.
Regulatory and inflation-linked mechanics are another headwind cited by BofA. The analyst noted a forthcoming change to the FERC PPI adder, which is slated to transition in mid-2026 from the current +0.58% plus PPI to -1.42% plus PPI inflation. BofA argues this reduces the potential upside that inflation-based adjustments might provide to revenue or margins.
On incremental investment economics, BofA modeled the impact of $200 million in so-called well connect growth capital expenditures. Under that scenario, the bank estimates the spend would generate about $1.90 per share of value for Plains All American, equivalent to a 9.7% yield at current levels. That incremental yield could fall to an estimated 8.7% if the company needs to allocate capital to expand the EPIC pipeline system, a factor that the bank says makes Plains less appealing versus peers with larger contracted volumes or terminal value.
Operational results released by the company in the same reporting period show a mixed picture. Plains All American reported net income attributable to the company of $441 million for the third quarter, up from $220 million in the comparable quarter a year earlier. Adjusted EBITDA for the quarter came in at $669 million, slightly above the prior-year quarter’s $659 million. The company also completed its acquisition of EPIC during the period.
BofA applied similar caution to Plains GP Holdings, lowering that vehicle’s rating from Neutral to Underperform while keeping a $19.00 price target. The downgrade was driven by the same concern about the Permian Basin’s longer-term production outlook, even as the bank acknowledged expectations for growth in the region’s Gas to Oil Ratio.
These developments combine near-term financial performance that showed improvement with longer-term structural and regulatory concerns that have prompted BofA to reduce its ratings on both Plains All American and Plains GP Holdings.