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Released February 06, 2020 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--So far this year, oil and gas producers have been hurting from low commodity prices, with a slew of industry leaders reporting massive write-downs and weakened profits. But pipeline owner and operator Plains All American Pipeline LP (NYSE:PAA) (PAA) (Houston, Texas) is optimistic about its own fortunes--like many midstream companies, it has proven resilient to weak prices, and it isn't changing its spending outlook. Industrial Info is tracking nearly $3 billion in active PAA projects, including more than $1.5 billion under construction.
Click on the image at right for a graph detailing PAA's active projects in the U.S. and Canada, by state or province.
Oil producers such as Exxon Mobil Company (NYSE:XOM) (Irving, Texas) and Chevron Corporation (NYSE:CVX) (San Ramon, California) have turned to high-growth areas such as the Permian Basin as weak oil prices have spurred some of their lowest quarterly earnings in years. Meanwhile, higher volumes on PAA's Permian-based systems--including the Cactus II pipeline, which came into service in August--boosted PAA's transportation business. But that's not to say PAA is totally immune to market factors: Less favorable crude oil differentials in the Permian resulted in a steep year-over-year decline in the company's supply and logistics business.
PAA also suffered from an 18% increase from fourth-quarter 2018 in costs and expenses, which helped to drive fourth-quarter 2019 net income down to $306 million, compared with $1.1 billion in the same period from the year before. Revenues, on the other hand, showed improvement: $9.15 billion, a 4.2% increase from 2018. PAA expects capital spending for 2020 to be about $1.4 billion, about $50 million higher than the preliminary capital program guidance in November.
One of PAA's largest transmission projects under construction is the $950 million Wink-to-Webster Pipeline, which is expected to carry up to 1 million barrels per day (BBL/d) of crude oil and condensate about 650 miles from Wink, a city in the Permian, to multiple locations along the Texas Gulf Coast. The pipeline, which is slated to finish construction next summer, is a joint venture among PAA, Exxon Mobil, MPLX LP (NYSE:MPLX) (Findlay, Ohio) and Delek Group (Netanya, Israel), among other companies. For more information, see Industrial Info's project report.
PAA and Phillips 66 (NYSE:PSX) (Houston, Texas) expect to begin construction later this summer on the 751-mile Red Oak Pipeline project, which will connect the Permian and Cushing, Oklahoma, with destinations along the Texas Gulf Coast. The joint venture, which was sanctioned by both companies in mid-2019, is supported by long-term volume commitments. The major phases of Red Oak include:
PAA executives said they expect Permian production to decline to about 400,000 BBL/d by the end of 2020, consistent with a recent slowing growth in U.S. oil production. When combined with a slew of pipelines expected to begin service this year, an overabundance of takeaway capacity could be looming for midstream companies like PAA. But in the near term, PAA executives expect manageable turbulence from market conditions, barring a severe price drop.
"We don't have meaningful direct commodity price exposure," said Al Swanson, the chief financial officer of PAA, in the conference call. "It's more of an indirect commodity price exposure." Swanson said a dramatic drop in oil prices could eventually result in fewer volumes flowing through PAA's systems, but "if oil prices fell from $55 to $50, you won't see [us reporting] a meaningful change in our company cash flow at all."
Far from the Permian, PAA is seeking permits for an estimated $175 million rebuild of crude oil pipelines north of Los Angeles, California. The company plans to abandon or remove between 123 and 124 miles of pipeline, which would carry up to 40,000 BBL/d of crude from Goleta to Pentland, California. For more information, see Industrial Info's project report.
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/.
Click on the image at right for a graph detailing PAA's active projects in the U.S. and Canada, by state or province.Oil producers such as Exxon Mobil Company (NYSE:XOM) (Irving, Texas) and Chevron Corporation (NYSE:CVX) (San Ramon, California) have turned to high-growth areas such as the Permian Basin as weak oil prices have spurred some of their lowest quarterly earnings in years. Meanwhile, higher volumes on PAA's Permian-based systems--including the Cactus II pipeline, which came into service in August--boosted PAA's transportation business. But that's not to say PAA is totally immune to market factors: Less favorable crude oil differentials in the Permian resulted in a steep year-over-year decline in the company's supply and logistics business.
PAA also suffered from an 18% increase from fourth-quarter 2018 in costs and expenses, which helped to drive fourth-quarter 2019 net income down to $306 million, compared with $1.1 billion in the same period from the year before. Revenues, on the other hand, showed improvement: $9.15 billion, a 4.2% increase from 2018. PAA expects capital spending for 2020 to be about $1.4 billion, about $50 million higher than the preliminary capital program guidance in November.
One of PAA's largest transmission projects under construction is the $950 million Wink-to-Webster Pipeline, which is expected to carry up to 1 million barrels per day (BBL/d) of crude oil and condensate about 650 miles from Wink, a city in the Permian, to multiple locations along the Texas Gulf Coast. The pipeline, which is slated to finish construction next summer, is a joint venture among PAA, Exxon Mobil, MPLX LP (NYSE:MPLX) (Findlay, Ohio) and Delek Group (Netanya, Israel), among other companies. For more information, see Industrial Info's project report.
PAA and Phillips 66 (NYSE:PSX) (Houston, Texas) expect to begin construction later this summer on the 751-mile Red Oak Pipeline project, which will connect the Permian and Cushing, Oklahoma, with destinations along the Texas Gulf Coast. The joint venture, which was sanctioned by both companies in mid-2019, is supported by long-term volume commitments. The major phases of Red Oak include:
- the 356-mile Wichita Falls to Sealy portion in Texas; see project report
- the 207-mile Cushing to Wichita Falls portion in Oklahoma and Texas; see project report
- the 179-mile Sealy to Ingleside portion in Texas; see project report
PAA executives said they expect Permian production to decline to about 400,000 BBL/d by the end of 2020, consistent with a recent slowing growth in U.S. oil production. When combined with a slew of pipelines expected to begin service this year, an overabundance of takeaway capacity could be looming for midstream companies like PAA. But in the near term, PAA executives expect manageable turbulence from market conditions, barring a severe price drop.
"We don't have meaningful direct commodity price exposure," said Al Swanson, the chief financial officer of PAA, in the conference call. "It's more of an indirect commodity price exposure." Swanson said a dramatic drop in oil prices could eventually result in fewer volumes flowing through PAA's systems, but "if oil prices fell from $55 to $50, you won't see [us reporting] a meaningful change in our company cash flow at all."
Far from the Permian, PAA is seeking permits for an estimated $175 million rebuild of crude oil pipelines north of Los Angeles, California. The company plans to abandon or remove between 123 and 124 miles of pipeline, which would carry up to 40,000 BBL/d of crude from Goleta to Pentland, California. For more information, see Industrial Info's project report.
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/.
