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Plains All American cuts capex, lifts 2020 earnings forecast

Devika Krishna Kumar

By Devika Krishna Kumar

NEW YORK, Aug 4 (Reuters) - Plains All American Pipeline LP on Tuesday cut capital expenditure by a further $100 million and increased its earnings forecast for 2020 in part because it expects to benefit from higher average tariff rates for its pipelines.

Adjusted EBITDA for 2020 was expected to decline to about $2.5 billion in 2020, slightly above its previous forecast for about $2.4 billion.

Oil demand worldwide crashed about 30% in April as the coronavirus pandemic restricted travel and after a brief price war between Saudi Arabia and Russia flooded the market with excess supplies.

Producers shut wells and slashed drilling activity in the Permian, the largest shale basin in the United States, and in the Bakken, after U.S. crude prices plunged during the second quarter. In one session in April, U.S. crude futures traded in negative territory for the first time in history.

Plains said shut-in production was gradually rebounding and it expects output in the Permian to recover to about 4.1 million bpd by the end of the year, slightly more than it expected earlier this year. Permian production hit a peak of 4.8 million bpd in March.

"In July and August, we expect activity to ramp up and (that) curtailments are behind us ... production in July exceeded our estimates," executive vice president Jeremy Goebel said.

Transportation volumes are expected to average about 6.4 million bpd in 2020 compared to its previous guidance of about 6.6 million bpd. Second quarter transportation segment adjusted EBITDA decreased 16% from a year earlier.

The reversal of the Capline pipeline was progressing and remains on budget, Plains said.

Volumes on Capline, once a major artery for imports and Gulf of Mexico crude used by U.S. Midwest refiners, have declined sharply as the U.S. shale boom pushed inland crude to the East Coast and Gulf Coast.

The Wink to Webster crude pipeline could potentially begin partial early service in the second quarter of 2021, Plains said. (Reporting by Devika Krishna Kumar in New York; Editing by David Gregorio)