Monday, June 28, 2010

Citigroup (NYSE:C) Launches PAA Gas Storage L.P. (NYSE:PNG) Coverage with "Buy" Rating

Citigroup (NYSE:C) has launched its coverage of Gas Storage L.P. (NYSE:PNG), giving them a price target of $25 and a "Buy" rating on top of it.

“We expect the partnership to provide an attractive low-risk total return at current levels through growing cash distributions and moderate unit price appreciation…We believe that the partnership’s low risk operations, long-term contracts, visible expansion projects, strong general partner, and above-average distribution growth of ~6% (versus 4.4% for the peer group) justify PNG’s premium valuation versus its natural gas transportation and storage peers…Unanticipated upside is likely to come from synergistic acquisitions of other natural gas storage facilities and the partnership’s recently formed commercial optimization group. With more than 75% ownership of the limited partner units, the general partner, PAA, is well incentivized to grow distributions. PAA’s long history of successfully acquiring and optimizing crude oil operations, should translate well to PNG’s natural gas storage operations,” said Citigroup analysts.

The company is involved in all aspects of operations of natural gas storage, and leases out pipeline transportation and storage capacity.

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