Plains All American Pipeline lowers profit outlook

Plains All American Pipeline LP has announced that its fourth quarter earnings rose 26% as lower costs offset weaker revenue and the master-limited partnership lowered the midpoint of its 2015 profit outlook.

For 2015, Plains All American Pipeline now expects the midpoint of its estimate for earnings before interest, taxes, depreciation and amortisation, excluding certain items, will be US$2.35 billion, compared with its previous view for just over US$2.5 billion.

“[Plains All American] is well positioned to manage through industry down cycles; however, we are not immune to the adverse impacts of a major step change in commodity prices that is accompanied by a similar change in producers’ activity levels,” stated Chairman and Chief Executive Greg L. Armstrong in prepared remarks last week.

“While the duration of the current down-cycle is unknown, our confidence in the North American crude oil resource base and its ultimate development remains high,” he added.

Houston-based Plains receives fees for many of its services, reducing direct exposure to the recent volatility of oil and gas prices. However, investors in the sector have been concerned that low prices will lead to reduced production in the industry. Many oil and gas producers have reduced their 2015 capital budgets, with some announcing layoffs.

Plains All American reported a profit of US$389 million, or 67 cents a limited partner unit, up from US$309 million, or 58 cents a unit, a year earlier. Excluding items, per-unit earnings fell to 60 cents from 76 cents. Revenue fell 11% to US$9.46 billion.

Plains All American’s pipeline business posted a 26% increase in segment profit, adjusted for some items, mostly owing to higher crude oil pipeline volumes.

The facilities segment’s earnings declined 11%, mostly the result of the impact of recontracting capacity originally contracted at higher rates at its natural-gas storage operations.

Meanwhile, supply and logistics profit fell 17%, reflecting less favourable natural-gas liquids and crude-oil markets.

Plains All American Pipeline also announced in its earnings call that during 4Q14, the US government approved its request to export condensate, a super light oil.

Harry Pefanis, President and Chief Operating Officer of PAA, said in the earnings call, “During the fourth quarter we received confirmation from the BIS [Bureau of Industry and Security] that condensate processed at our Gardendale facility meets definition of a product that can be exported. Today, we have not exported any processed condensate; however, we believe we are well positioned to segregate the processed condensate and to export the product when market conditions warrant.”

Edited from various sources by Elizabeth Corner

Sources: Market Realist, Wall Street Journal

Read the article online at: https://www.worldpipelines.com/business-news/23022015/plains-all-american-pipeline-lowers-profit-outlook/