Plains All American Ramps 2015 Growth Capex to $2.15 Billion, First-Quarter Earnings Drop

Researched by Industrial Info Resources (Sugar Land, Texas)--Plains All American Pipeline LP (NYSE:PAA) (PAA) (Houston, Texas) boosted its planned expansion capital expenditures (capex) for 2015 to $2.15 billion, from its earlier estimate of $1.85 billion. The pipeline company said it was accelerating some of its planned expenditures, and added some new projects.

The top three capex items include $390 million for Permian Basin projects; $300 million for the Fort Saskatchewan Facility and NGL line project in Canada; and $265 million for rail terminal projects. Maintenance capex for 2015 is expected to range from $205 million to $225 million, PAA executives said during the company's first-quarter earnings conference call.

Industrial Info is tracking 40 active PAA projects worth $1.8 billion. This includes 14 projects, worth $1.26 billion, that are in the planning phases, where plenty of factors could change their timing or outcome. Twenty projects, worth $292 million, are under construction, and six projects, worth $245 million, are in the engineering phase.

Working with joint venture partner Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas), PAA is continuing with the permitting process for the proposed 424-mile, grassroot Diamond Pipeline. The $800 million pipeline would move 200,000 barrels per day (BBL/d) of sweet Permian Basin, Bakken and Mid-Continent crude from Plains' Cushing terminal in Oklahoma to Valerio's refinery in Memphis, Tennessee. Construction kick-off is slated for fourth-quarter 2015, with completion in fourth-quarter 2016 or early 2017.

PAA also plans to spend $100 million this year on the Saddlehorn pipeline project, which would initially transport 200,000 barrels per day (BBL/d) of Denver-Julesburg Basin/Wattenburg crude oil from Platteville, Colorado, to a terminal in Cushing, Oklahoma. PAA holds a 40% interest in the project. Construction kick-off would take place in third-quarter 2015, with completion in second-quarter 2016. Capacity would eventually be increased to 400,000 BBL/d.

For related information, see May 5, 2015, articles - Magellan Midstream Boosts 2015 Growth Capex, Sees Drop in Quarterly Profit and Anadarko Sees Growth in Eagle Ford, Marcellus in First-Quarter 2015, Expects Up to $5.7 Billion in Capex for Year, and February 6, 2015, article - Plains All American Pipeline to Spend $1.85 Billion on Capital Growth Projects This Year.

PAA reported its first-quarter 2015 earnings fell 26% from the same period in 2014, as revenues dropped by nearly 50%. Quarterly earnings dropped to $283 million from $384 million, while revenues fell to $5.94 billion from $11.68 billion.

Nonetheless, Chief Executive Officer Greg Armstrong said earnings were solid, noting that on an adjusted basis, first-quarter net income rose 5% to $369 million. The adjusted earnings did not include a $91 million loss on derivative activities and other charges.

However, Armstrong warned of challenging industry conditions, including high oil inventory levels, which "could get worse before it gets better." Overall U.S. inventories are 92 million barrels higher than what they were last year, he said, adding, "Something has to give."

Armstrong slightly lowered the midpoint of its adjusted 2015 earnings guidance range for the year to $2.33 billion, a $25 million adjustment.

PAA reported its adjusted Transportation segment profit increased 15%, driven by higher crude oil pipeline volumes that stemmed from organic growth as well as its 50% interest in the BridgeTex pipeline in Texas. The Transportation segment reported first-quarter, average crude oil and natural gas liquids (NGL) pipeline volumes of 4.12 million BBL/d, up from 3.84 million BBL/d in first-quarter 2014. Trucking volumes averaged 123,000 BBL/d, compared with 130,000 BBL/d in the same quarter of 2014.

First-quarter Supply and Logistics segment adjusted income increased 19%, PAA said, due to favorable market conditions. First-quarter crude oil and NGL volumes averaged 1.27 million BBL/d, up from 1.17 million BBL/d in the same quarter of 2014.

Facilities segment earnings dropped by 9% from the same period in 2014, due to lower rail terminal revenue. The segment reported average monthly volumes of 124 million barrels of oil equivalent (BOE), compared with 121 million BOE a year earlier.

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