Plains All American Increases Capex for Permian Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Pipeline operator Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) is increasing capital spending in 2017, the company announced Tuesday. In the company's earnings conference call, Chief Executive Officer Greg Armstrong said, "We continue to progress our capital projects, which remain on time and on budget, and relative to last quarter, we increased our estimated 2017 expansion capital costs by approximately 5%, which was principally associated with the addition of our new Permian-to-Cushing takeaway and related Delaware Basin expansion." The company increased 2017 capital expenditures to $950 million. Industrial Info is tracking $1.7 billion in active Plains All American projects.

One of the major projects garnering the increased capital spending is Plains All American's grassroot Sunrise Pipeline, which will move crude oil from the Delaware Basin to the crude oil storage hub in Cushing, Oklahoma. The 520-mile pipeline will move 350,000 barrels per day (BBL/d) from Midland and Colorado City in Texas to Cushing. For more information, see Industrial Info's project reports on the Texas and Oklahoma portions of the pipeline.

From Cushing, Plains All American has formed a joint venture with Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) to transport light, sweet crude to Valero's refinery in Memphis, Tennessee. The 424-mile Diamond Pipeline will transport 200,000 BBL/d to the refinery. All aspects of the project have an estimated total investment value of $800 million. The project kicked off in 2016 and is expected to be completed in the next few months. For more information, see Industrial Info's project reports on the Oklahoma, Arkansas and Tennessee portions of the pipeline.

To help handle to the oil coming into and leaving Cushing, Plains All American plans to expand its terminal in Cushing. At the company's existing 18 million-barrel terminal with more than 40 tanks, Plains All American will construct two 200,000-barrel tanks and two 380,000-barrels tanks to increase storage capacity. Construction is planned to kick off this summer and be completed in early 2018. The project has an estimated total investment value of $75 million. For more information, see Industrial Info's project report.

Plains All American reported second-quarter 2017 net income of $188 million, compared with $101 million in second-quarter 2016. The company reduced its expected 2017 earnings by $185 million, primarily due to expected lower profits in the Supply & Logistics segment. Competition with other transmission companies is a primary issue. "A number of factors have influenced the performance of this segment, principally competition and a reduction in commercial arbitrage opportunities," said Armstrong. "The level of competition is particularly intense--both in the number of competitors and the amount of capital-seeking investments in crude oil and NGL [natural gas liquids] infrastructure."

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