PAA, EPD to Expand JV Pipeline

Zacks

Plains All American Pipeline L.P. (PAA) and Enterprise Products Partners, L.P. (EPD) announced that they would expand the capacity of their Eagle Ford Joint Venture (:JV) crude oil pipeline. After completion of the project, the capacity of the pipeline would increase to 470,000 barrels per day (bpd) from 350,000 bpd. The cost of the expansion project is expected to be $120 million and will be online in second-quarter 2015.

Plains All American Pipeline and Enterprise Products Partners will complete the pipeline project in phases that would include adding pumping capacity and looping certain sections of the existing operations. In addition, the partnerships will build an extra 2.3 million barrels of operational storage capacity in Gardendale, Tilden and Corpus Christi.

These initiatives will enable the JV to cope with additional volumes of crude oil that will be generated from Plains All American’s Cactus pipeline, currently in the construction phase.

In Aug 2012, Plains All American Pipeline and Enterprise Products Partners inked a 50/50 JV agreement. Per the deal, the partnerships will construct a 175-mile (281.6 kilometers) crude oil and condensate pipeline, a marine terminal facility and roughly 1.8 million barrels of storage capacity across the system. The pipeline system is expected to be completed by Sep 30, 2013.

The venture is expected to reduce the partnerships’ construction costs, while enhancing the market accessibility of the shippers.

Eagle Ford JV crude oil pipeline is supported by the long-term producer commitment. The long-term commitment prompted Plains All American Pipeline to invest substantial amounts to set up new pipelines in the region. Most of the upstream players including ConocoPhillips (COP), Chesapeake Energy Corp. (CHK) and Murphy Oil Corp. (MUR) are active in South Texas-based mineral-rich Eagle Ford area and continues with their steady exploration and production activities.

We believe installation of the new pipelines as well as expanding the existing ones in the region will allow Plains All American Pipeline to serve more number of customers, subsequently improving revenues going forward.

Plains All American Pipeline currently has a Zacks Rank #3 (Hold).

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