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Plains All American' Open Season for Western Corridor System

Zacks Equity Research

Plains All American Pipeline, L.P. PAA has announced a binding open seasonin northern Montana for delivery of light crude oil transportation service to Gulf Coast markets. The open season has been organized to ascertain additional long-term for its Western Corridor Pipeline System.

Post successful completion of open season, the capacity of the system will be expanded by up to an additional 70,000 barrels per day and is expected to begin services in the second quarter of 2021.

Open Season & Investments

Pipeline construction involves huge capital investments, which are allocated towards laying down new pipelines, expansion and maintenance of existing operations. An open season offers better visibility of demand for the new pipeline for long-term transportation.

Plains All American maintains a systematic capital investment strategy to expand operations through organic growth initiatives. After spending nearly $1.9 billion on capital expansion in 2018, the partnership now anticipates the same at $1.35 billion.

The figure is above the prior expectation of $1.1 billion. Moreover, the partnership expects adjusted EBITDA from fee-based earnings segment to reach $2,400 million in 2019, up 8.2% from 2018 levels, courtesy of higher contribution from the Transportation segment.

Increasing Production of Crude Oil

Per U.S. Energy Information Administration’s (EIA), crude oil production and lease condensate reached another milestone in April 2019, totaling 12.2 million barrels per day. Per a recent report of SHARE AMERICA, the United States is the world’s largest producer of crude oil and will surpass Russia and Saudi Arabia through 2019.

Per another EIA report, crude oil production in Montana increased 28.5% to 69,000 barrels per day in April 2019 year over year. We expect that higher production in the region will increase demand for pipeline services, which will contribute to the success of the open season for Western Corridor Pipeline System.

Price Movement

In the past year, Plains All American’s units have returned 2.6% against the industry’s decline of 9.7%.


Zacks Rank and Stocks to Consider

Plains All American carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Some better-ranked stocks from the same sector are Shell Midstream Partners, L.P. SHLX, Halcon Resources Corp. HK and Enterprise Products Partners L.P. EPD, each holding a Zacks Rank of 2 (Buy).

Shell Midstream Partners pulled off an average positive earnings surprise of 5.78% in the last four quarters. The partnership’s long-term earnings growth is pegged at 2.50%.

Halcon Resources pulled off an average positive earnings surprise of 170% in the last four quarters. The company’s long-term earnings growth is pegged at 20.60%.

Enterprise Products Partners delivered an average positive earnings surprise 17.03% in the last four quarters. The partnership’s long-term earnings growth is pegged at 4%.

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