Plains All American Pipeline to Spend $1.85 Billion on Capital Growth Projects This Year

Researched by Industrial Info Resources (Sugar Land, Texas)--Plains All American Pipeline LP (NYSE:PAA) (PAA) (Houston, Texas) and Plains GP Holdings (NYSE:PAGP) (Houston) plan to spend $1.85 billion on capital growth projects this year, compared with $2 billion in organic growth investments for 2014, company executives said Thursday. Maintenance capital expenditures in 2015 are expected to run from $205 million to $225 million.

Spectra Energy Corporation (NYSE:SE) (Houston) and Spectra Energy Partners (NYSE:SEP) (Houston) also announced capital expenditure (capex) plans for 2015 on Thursday.

Industrial Info is tracking 49 active PAA projects worth $2.19 billion. This includes 29 projects valued at $896 million that are under construction; nine projects, valued at $325 million, that are in the engineering stages; and 11 projects, valued at $965 million, that are in the planning stages, where factors could increase, decrease or totally eliminate the expected spending.

Harry Pefanis, PAA's president and chief operating officer, said during the company's earnings conference call that Permian area capital investments for 2015 will total $365 million, followed by $290 million for Fort Saskatchewan and a related natural gas liquids (NGL) line in Canada, and $240 million for rail terminal projects.

Pefanis gave an update on current projects Thursday, including Cactus Pipeline Project in Texas.

Construction kicked off for the $350 million, grassroot Cactus Pipeline Project in the second quarter of 2014, with planned completion in first-quarter 2015, according to Industrial Info. Willbros Engineering (NYSE:WG) (Houston) and Holloman Corporation (Houston) were contracted to build the 310-mile Texas oil pipeline. The McCamey-to-Gardendale pipeline will move up to 200,000 barrels per day (BBL/d) of sweet and sour Permian crude oil to the Eagle Ford Pipeline, operated by a Plains All American/Enterprise Products Partners LP (NYSE:EPD) (Houston) joint venture. The Eagle Ford Pipeline directly serves the Three Rivers and Corpus Christi markets and can supply the Houston-area market through a connection to the Enterprise South Texas Crude Oil Pipeline, according to PAA.

Pefanis said the Cactus Pipeline will be in partial service in April, delivering 50,000 BBL/d to 100,000 BBL/d, and will ramp up to 150,000 BBL/d in August. The pipeline will be expanded to 330,000 BBL/d in first-quarter 2016, he said.

Greg Armstrong, PAA's chief executive officer, said the plunge in hydrocarbons prices, and the "incontrovertible fact that stuff happens," made the company adjust its guidance numbers for 2015.

Armstrong said that as a result of a drop in anticipated drilling activity for 2015, the company has lowered its 2015 midpoint acquisition guidance for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by 6.5% to $2.35 billion. The company also scaled back its guidance for distribution growth for the year.

PAA reported 2014 fourth-quarter net earnings of $389 million, up 26% from a year earlier. Revenues for the quarter fell 11% from fourth-quarter 2013 to $9.46 billion.

PAA's Transportation segment reported a fourth-quarter profit of $267 million, up 29% from a year earlier. Profit for the Facilities segment fell 12% to $149 million, and the Supply and Logistics segment profit rose 67% to $249 million. For all of 2014, PAA's net income rose 2% from the previous year to $1.38 billion. Revenue for the year rose nearly 3% to $43.46 billion.

Meanwhile, Spectra Energy Corporation and Spectra Energy Partners on Thursday announced $2.5 billion in planned expansion capex for 2015. Maintenance capex will total $746 million, according to the company.

Total capital and investment spending for 2014 was $2.29 billion, the company said in its Wednesday earnings release. Planned capex for 2016 and 2017 will be $2.8 billion for each year, according to Spectra. Company executives said Spectra's diversified portfolio cushions it from the impact of lower commodities prices.

For related information, see February 5, 2015, article - Spectra Energy Reports 34% Jump in Fourth-Quarter Profit, Puts $800 Million in New Projects to Work in 2014.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 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.