Houston’s big pipeline and storage company Plains All American has cuts its capital spending this year by 33 percent or $750 million, according to its latest announcement. Combined with the elimination of joint venture project funding, the reduction is actually 47% or $1.35 billion.
“We are taking a number of actions in response to the current dynamic and uncertain market conditions to further strengthen our balance sheet and further enhance our liquidity and long-term financial flexibility,” stated Willie Chiang, Chairman and CEO of Plains All American. “These actions include significantly reducing and continuing to challenge our capital program, reducing our distribution, progressing asset sales, and reducing costs, while remaining focused on operating safely and responsibly.”
Plains has several lines carrying crude oil from Cushing south to Texas and its Diamond Pipeline carries crude eastward.
The company said it’s also decreasing share distributions payable in May by 50% for a reduction of $525 million on an annualized basis. The company also completed another $165 million asset sale and plans to make continued cost reductions as it reorganizes efforts in 2020.
CFO and Executive Vice President Al Swanson said the moves left the company with nearly $2.5 billion of committed liquidity at the end of the first quarter.
Total expansion capital for 2020/2021 is now targeted to be approximately $1.55 billion, or $750 million (33%) lower than the previously targeted $2.3 billion capital program, and $1.35 billion (47%) lower when eliminating $600 million of assumed JV project financing for the Red Oak project, which has been deferred.
First quarter 2020 expansion capital expenditures are estimated to be approximately $350 million. The Partnership will continue to work closely with customers and industry partners to optimize, defer and potentially further reduce the capital program, subject to producer activity levels on Plains system.
Plains’ Board of Directors has approved a distribution of $0.18 per PAA common unit and PAGP Class A share for the first quarter of 2020. These distributions represent a 50% reduction relative to distributions paid in February 2020 and equate to an annualized distribution rate of $0.72 per PAA common unit and corresponding PAGP Class A share versus its previous annualized level of $1.44 per PAA common unit / PAGP Class A share.
Regarding the asset sales program, the Partnership closed an incremental sale on April 1, which generated proceeds of $165 million and brings year-to-date proceeds to approximately $245 million. An additional $195 million asset sale remains under definitive agreement and is expected to close later in the year. Plains is continuing its efforts to advance additional asset sales opportunities.
PAA owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada. On average, PAA handles more than 6 million barrels per day of crude oil and NGL in its Transportation segment.
Source: Business Wire