Plains All American Sees Major Pipeline Startups on Horizon

Researched by Industrial Info Resources (Sugar Land, Texas)--Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) recently detailed its plans to wrap up construction on three of its major oil pipeline projects, following third-quarter 2016 results that saw a gain in profits, despite an overall decline in revenues. The Diamond, Red River and Caddo pipelines are set to be completed in the coming year, substantially growing the company's services. Industrial Info is tracking $1.43 billion in active projects involving Plains All American.

The company expects capital expenditures for full-year 2016 to be between $1.39 billion and $1.48 billion, while maintenance capital expenditure will be between $175 million and $185 million. Over the past year, Plains All American's costs have generally dropped as it reduced purchases and related expenses, as well as field operating costs, depreciation and amortization. For more information, see February 10, 2016, article - Plains All American Pipeline to Spend at Least $1.4 Billion this Year on Growth Capital Projects .

The drop in expenditures helped Plains All American to report $297 million in net income for third-quarter 2016, a 19.28% increase from the same period last year, despite a 6.9% decline in revenues to $5.17 billion. The revenue drop was attributed to weaker business in the Supply & Logistics segment, although the company also reported solid performances in its fee-based Facilities and Transportation segments. Plains All American took a big hit in the third quarter of 2015 following a major oil leak near Santa Barbara, California. That pipeline remains out of service.

The company also is fulfilling its 2016 projections for non-core asset sales, with eight transactions completed year-to-date, with net proceeds of about $550 million.

Capital expenditures for 2017 are expected to range between $500 million and $700 million, a significant portion of which is associated with the widely followed Diamond Pipeline joint venture. Executives provided an update on the Diamond Pipeline in a third-quarter earnings call. Construction has started, with all necessary permits obtained, and the company expects the line to be in service in fourth-quarter 2017.

Industrial Info is tracking three major segments of the Diamond Pipeline: the $250 million Oklahoma portion, the $400 million Arkansas portion and the $5 million Tennessee portion. The three segments, which run 160 miles, 260 miles and 3 miles, respectively, are expected to transport 200,000 barrels per day (BBL/d) of sweet Permian Basin, Bakken, and Mid-Continent crude from Plains' terminal in Cushing, Oklahoma, to Valero's refinery in Memphis, Tennessee. For more information, see Industrial Info's project reports on the Oklahoma, Arkansas and Tennessee portions.

Three crude-oil pump stations attached to the Diamond Pipeline also are under construction and are expected to go into service at the same time: the $50 million pump station in Cushing, Oklahoma; the $50 million pump station in Cameron, Oklahoma; and the $50 million pump station in Griffithville, Arkansas. Each will feature three 3,000-horsepower pump packages from Siemens AG (Munich, Germany). For more information, see Industrial Info's project reports on the Cushing, Cameron and Griffithville stations.

Plains All American also pushed back its Red River and Caddo pipeline systems a couple of months due to heavy rainfall, but executives still expect both to be completed and in service by the end of the fourth quarter. Industrial Info is tracking $65 million Oklahoma and $100 million Texas portions of the Red River pipeline, which runs from Cushing to Longview, Texas, where it will connect with the Caddo pipeline; it is expected to have a capacity of 150,000 BBL/d. For more information, see Industrial Info's project reports on the Oklahoma and Texas segments.

The Caddo pipeline, which will transport 80,000 BBL/d of crude from Longview to Shreveport, Louisiana, includes a $50 million Texas portion, a $20 million Louisiana portion, and a $30 million pump station in Longview. The total length is expected to be about 80 miles. For more information, see Industrial Info's project reports on the Texas and Louisiana portions, and the pump station.

"There have been recent indications that the current industry cycle for crude oil markets has stabilized, and upstream activity levels are increasing in certain areas, particularly the Permian and STACK regions," said Alan Swanson, the chief financial officer and executive vice president of Plains All American, in a quarterly earnings presentation. "Certain of these positive developments will impact the midstream sector on a delayed basis. In areas outside the Permian and STACK [shale plays], we expect continued production decline through mid-2017, with meaningful production growth not resuming until 2018."

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