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Researched by Industrial Info Resources (Sugar Land, Texas)--Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) is boosting its planned capital expenditures (CAPEX) by $650 million for 2018-2019, with the lion's share of that amount to be spent on accelerating oil takeaway capacity from the Permian Basin, company executives said this week. Industrial Info is tracking more than $2.5 billion in project activity by the company.
Plains' capital program for the two-year period now totals $2.6 billion.
Chief Operating Officer Willie Chiang told investment analysts on Tuesday that about $550 million of the increase is tied to the Permian Basin. "The $550 million of it is really associated with gathering, intra-basin, and a lot of the projects deep in the Delaware Basin," he said.
Among other projects, Plains is concentrating on completion of the Cactus II crude oil pipeline and phases I and II of the Sunrise system.
With an estimated total investment value (TIV) of $1.1 billion and an expected completion in the second half of 2019, the Cactus II pipeline system will connect the Permian to ports in the Corpus Christi/Ingleside area on the Texas Gulf Coast. Cactus II includes a combination of existing pipelines and two new pipelines. The first new pipeline will extend from Wink to McCamey, Texas, and the second pipeline will extend from McCamey to Corpus Christi/Ingleside. For more information, see Industrial Info's project reports on the Wink-McCamey segment and McCamey-Corpus Christi/Ingleside segment. Chiang said in May that the pipeline would have a fully expanded capacity of 670,000 barrels per day (BBL/d). The pipeline was originally planned to transport 585,000 BBL/d. For more information, see May 10, 2018, article - Plains All American: Permian Takeaway Capacity Filling Quicker Than Expected.
The Sunrise pipeline loop addition will run from Midland, Texas, to Plains' terminal in Cushing, Oklahoma, adding about 500,000 BBL/d of capacity from Midland to Colorado City and Wichita Falls in Texas. The project has a TIV of $500 million and is expected to be in service in mid-2019. For more information, see Industrial Info's reports on the Midland-Colorado City, Colorado City-Wichita Falls and Oklahoma segments.
In June, Plains and Exxon Mobil Corporation (ExxonMobil) (NYSE: XOM) (Irving, Texas) announced plans to build a 1 million-BBL/d joint venture pipeline from Wink and Midland to the Houston area. A final investment decision for the project is expected in fourth-quarter 2018.
"We expect [Plains'] equity participation in the joint venture to be meaningful, but well less than 50%, and the majority of the capital investment to occur in 2020, with EBITDA [earnings before interest, taxes, depreciation and amortization] contributions beginning in 2021," Chiang said during Tuesday's second-quarter earnings conference call.
Plains and ExxonMobil are among a number of companies racing to ramp up oil and gas takeaway capacity from the Permian. For more information, see August 9, 2018, article - DCP Midstream Projects Expand Footprint in DJ, Permian Basins.
Singing the Steel Tariff Blues
Plains executives said Tuesday the company will continue to seek a steel tariff exemption for the Cactus II pipeline. The Department of Commerce denied the request in July, but the company can refile for an exclusion. Chiang said the tariff would cost the company $40 million.
Chiang said the 25% steel tariff is unjust because the pipeline steel was ordered from a manufacturer in Greece well before the tariffs were put in place.
"We're moving forward (with)the project but believe that imposing a tax on preexisting orders isn't just, especially considering specific materials we purchased abroad were not readily available in the U.S.," Chiang said.
Plains Chief Executive Officer Greg Armstrong said the company always has the goal of buying U.S.-made steel pipeline, but in the case of the Cactus II, "we were looking for a specific type of steel and specifications that generally weren't available in the U.S. and so we went to an outside supplier."
For related information on the steel tariff, see August 3, 2019, article - U.S. Steel Lauds Tariffs as Second-Quarter Results Show Rapid Growth, Spending Jump.
Plains reported $100 million in net income for the just-ended quarter, down from $188 million reported in second-quarter 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Plains' capital program for the two-year period now totals $2.6 billion.
Chief Operating Officer Willie Chiang told investment analysts on Tuesday that about $550 million of the increase is tied to the Permian Basin. "The $550 million of it is really associated with gathering, intra-basin, and a lot of the projects deep in the Delaware Basin," he said.
Among other projects, Plains is concentrating on completion of the Cactus II crude oil pipeline and phases I and II of the Sunrise system.
With an estimated total investment value (TIV) of $1.1 billion and an expected completion in the second half of 2019, the Cactus II pipeline system will connect the Permian to ports in the Corpus Christi/Ingleside area on the Texas Gulf Coast. Cactus II includes a combination of existing pipelines and two new pipelines. The first new pipeline will extend from Wink to McCamey, Texas, and the second pipeline will extend from McCamey to Corpus Christi/Ingleside. For more information, see Industrial Info's project reports on the Wink-McCamey segment and McCamey-Corpus Christi/Ingleside segment. Chiang said in May that the pipeline would have a fully expanded capacity of 670,000 barrels per day (BBL/d). The pipeline was originally planned to transport 585,000 BBL/d. For more information, see May 10, 2018, article - Plains All American: Permian Takeaway Capacity Filling Quicker Than Expected.
The Sunrise pipeline loop addition will run from Midland, Texas, to Plains' terminal in Cushing, Oklahoma, adding about 500,000 BBL/d of capacity from Midland to Colorado City and Wichita Falls in Texas. The project has a TIV of $500 million and is expected to be in service in mid-2019. For more information, see Industrial Info's reports on the Midland-Colorado City, Colorado City-Wichita Falls and Oklahoma segments.
In June, Plains and Exxon Mobil Corporation (ExxonMobil) (NYSE: XOM) (Irving, Texas) announced plans to build a 1 million-BBL/d joint venture pipeline from Wink and Midland to the Houston area. A final investment decision for the project is expected in fourth-quarter 2018.
"We expect [Plains'] equity participation in the joint venture to be meaningful, but well less than 50%, and the majority of the capital investment to occur in 2020, with EBITDA [earnings before interest, taxes, depreciation and amortization] contributions beginning in 2021," Chiang said during Tuesday's second-quarter earnings conference call.
Plains and ExxonMobil are among a number of companies racing to ramp up oil and gas takeaway capacity from the Permian. For more information, see August 9, 2018, article - DCP Midstream Projects Expand Footprint in DJ, Permian Basins.
Singing the Steel Tariff Blues
Plains executives said Tuesday the company will continue to seek a steel tariff exemption for the Cactus II pipeline. The Department of Commerce denied the request in July, but the company can refile for an exclusion. Chiang said the tariff would cost the company $40 million.
Chiang said the 25% steel tariff is unjust because the pipeline steel was ordered from a manufacturer in Greece well before the tariffs were put in place.
"We're moving forward (with)the project but believe that imposing a tax on preexisting orders isn't just, especially considering specific materials we purchased abroad were not readily available in the U.S.," Chiang said.
Plains Chief Executive Officer Greg Armstrong said the company always has the goal of buying U.S.-made steel pipeline, but in the case of the Cactus II, "we were looking for a specific type of steel and specifications that generally weren't available in the U.S. and so we went to an outside supplier."
For related information on the steel tariff, see August 3, 2019, article - U.S. Steel Lauds Tariffs as Second-Quarter Results Show Rapid Growth, Spending Jump.
Plains reported $100 million in net income for the just-ended quarter, down from $188 million reported in second-quarter 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
