Plains All American Pipeline to Spend at Least $1.4 Billion this Year on Growth Capital Projects

Researched by Industrial Info Resources (Sugar Land, Texas)--Plains All American Pipeline, L.P. (PAA) (NYSE:PAA) (Houston, Texas) will spend at least $1.4 billion this year on major capital projects as it pushes to complete its capital expansion program in 2017, company executives with the oil and natural gas liquids (NGL) pipeline, logistics and storage company said. Industrial Info is tracking 16 PAA projects ranging in value from $5 million to $400 million.

PAA executives outlined the planned capital expenditures during the company's earnings conference call on Tuesday. Net income for fourth-quarter 2015 totaled $247 million, down 37% from fourth-quarter 2014. Revenue for the just ended quarter amounted to nearly $5 billion, a 47% plunge from about $9.5 billion a year earlier.

Chief Executive Officer Greg Armstrong said lower pipeline volumes, delayed NGL inventory draws as a result of unseasonably warm temperatures and severe weather in West Texas all contributed to the drop in fourth-quarter earnings.

For all of 2015, the company reported $903 million in net income, down 35% from $1.4 billion in 2014. Revenue for last year totaled $23.2 billion, down 46% from $43.5 billion in the previous year.

Armstrong warned that economic conditions for the oil industry are likely to get worse in the near term before they begin to improve.

PAA's earnings midpoint guidance calls for $2.275 billion in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), compared with $2.2 billion in 2015.

PAA's planned expansion capital expenditures for this year are at least 30% less than the company's previously stated expenditures for 2015. Chief Financial Officer Al Swanson indicated that the purchase by Valero of 50% of one major project and a change in the partnership arrangement for another project has reduced PAA's share of the capital expenditures by $565 million.

This year's expansion capital will go into a range of projects, including $290 million for the Red River Pipeline Project, a 400-mile pipeline that will initially transport 120,000 barrels per day of oil from Cushing, Oklahoma to Longview, Texas.

PAA also plans to spend $260 million this year on the Diamond Pipeline Project. The 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 Valero Energy Corporation's (NYSE:VLO) (San Antonio, Texas) refinery in Memphis, Tennessee. Project completion is scheduled for second-quarter 2017. Valero has acquired a 50% interest in the pipeline.

For related information, see May 7, 2015, article - Plains All American Ramps 2015 Growth Capex to $2.15 Billion, First-Quarter Earnings Drop.

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