Plains All American Slashes Spending, Sheds Assets

HOUSTON (P&GJ) — Pipeline operator Plains All American today said it has slashed its capital spending program by a third, cut shareholder distributions in half and sold an additional $165 million in assets in response to market conditions.

Houston-based Plains said its total expansion capital for 2020-21 is now targeted to be approximately $1.55 billion, or $750 million lower than the previously targeted $2.3 billion capital program. The spending cuts total $1.35 billion, or 47%, when eliminating $600 million of financing for the Red Oak Pipeline joint venture with Phillips 66, which has been deferred.

The balance of the capital reductions relate to cancellations, cost savings and scope adjustments to other capital projects. 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 (the) Plains system," it said, noting increased market risks and uncertainties due to the COVID-19 pandemic and the actions of Saudi Arabia and Russia to increase crude oil production.

"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," said 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 said it completed an incremental sale on April 1 that generated proceeds of $165 million, raising its total asset sales to $440 million either closed or under definitive agreement since the start of this year. Including the most recent sale, year-to-date proceeds now total $245 million. The balance of the total is expected to close later in the year, and Plains said it is looking for opportunities to sell off more assets.

"We are committed to further strengthening our balance sheet, reducing leverage, and further enhancing our financial flexibility for the benefit of all of our stakeholders," stated Al Swanson, Executive Vice President and CFO of Plains All American. "Importantly, we ended the first quarter with approximately $2.5 billion of committed liquidity and no near-term needs to access either the debt or equity capital markets." Swanson added.

Plains' Board of Directors approved a distribution of $0.18 per PAA common unit and PAGP Class A share for the first quarter of 2020 – a 50% reduction, compared with distributions paid in February 2020.  The partnership said the cut acknowledges "the uncertain duration of current and anticipated industry challenges," along with the partnership's "commitment to maintaining a solid capital structure and strong liquidity."

Plains also announced a quarterly cash distribution of $0.525 per Series A Preferred Unit, or $2.10 on an annualized basis. For its Series B Preferred Units, it announced a semi-annual distribution of $30.625 per Series B Preferred Unit. All distributions will be payable on May 15 to holders of record on May 1.

"We continue to actively monitor the current environment and intend to address forward guidance and related matters on our first-quarter earnings conference call in May," Swanson said.

Plains All American is one of the largest pipeline operators in the United states, with 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, its Transportation segment handles more than 6 MMbpd of crude oil and NGL.

 

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