What is PAA Natural Gas Storage, L.P. Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, PAA Natural Gas Storage, L.P.'s Probability of Financial Distress (%) is 0.00%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of PAA Natural Gas Storage, L.P.'s Probability of Financial Distress (%)
For the Utilities - Regulated Gas subindustry, PAA Natural Gas Storage, L.P.'s Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
PAA Natural Gas Storage, L.P.'s Probability of Financial Distress (%) Distribution in the Utilities - Regulated Industry
For the Utilities - Regulated industry and Utilities sector, PAA Natural Gas Storage, L.P.'s Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where PAA Natural Gas Storage, L.P.'s Probability of Financial Distress (%) falls into.
PAA Natural Gas Storage, L.P. Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | 0.00 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.00% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For non-financial companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
PAA Natural Gas Storage, L.P. (FRA:4PN) Business Description
Traded in Other Exchanges
N/A
Address
PAA Natural Gas Storage, L.P., is a Delaware corporation formed by Plains All American Pipeline, L.P. on January 15, 2010. The Company is engaged in acquisition, development, operation and commercial management of natural gas storage facilities. The Company owns and operates three natural gas storage facilities located in Louisiana, Mississippi and Michigan. It also leases storage capacity and pipeline transportation capacity from third parties from time to time in order to increase its operational flexibility and enhance the services it offers to its customers. The Company provides natural gas storage services to a broad mix of customers, including local gas distribution companies, or LDCs, electric utilities, pipelines, direct industrial users, electric power generators, marketers, producers, LNG importers and affiliates of such entities. It generates revenue mainly from the provision of fee-based gas storage services to its customers. The majority of its net revenue from firm storage services is derived from contracts with initial terms that generally range from one year to 10 years in length and pursuant to which customers receive the assured or "firm" right to store gas in its facilities. Under its firm storage contracts, its customers are obligated to pay it fixed monthly capacity reservation fees, which is owed to it regardless of the actual storage capacity utilized. The Company also generate net revenue from the provision of hub services at its facilities and through the merchant storage activities of its commercial marketing group, which captures short term market opportunities by utilizing a portion of its storage capacity and engaging in related commercial marketing activities. The Company's merchant storage activities generate revenue through the hedged purchase and sale of natural gas net of any storage related costs incurred. It utilizes physical storage at its facilities and derivatives to hedge expected margin from these activities. The Company competes with several regional high-deliverability storage facilities along the Gulf Coast as well as the storage services offered by interstate and intrastate pipelines. The Company is subject to regulatory oversight by numerous federal, state, and local regulatory agencies.
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