Plains All American Expects Strong Permian Crude Growth

Plains All American Pipeline (PAA) reported strong fourth-quarter and full-year 2022 earnings after markets closed on Feb. 8, with EBITDA results beating its own guidance and analyst estimates.

The company expects a strong year ahead as well.

“Looking to 2023, our Permian Basin assets are well-positioned to benefit from continued production growth,” said Willie Chiang, chairman and CEO of Plains, during a call with analysts.

Plains earned $263 million on revenues of $12.95 billion in its fourth quarter. Earnings per common unit of 30 cents fell short of analyst estimates, but investors didn’t seem to mind. PAA shares opened at $12.68 on Feb. 9 and bounced to $13 by mid-morning, before slumping along with the rest of the market. By mid-afternoon on Feb. 13, the stock traded at $12.87. The company’s 12-month high close is $12.98/unit.

AJ O’Donnell of East Daley Analytics was particularly pleased with fourth-quarter EBITDA of $659 million, which matched his estimate exactly. It beat the consensus forecast of $622 million. Full-year adjusted EBITDA totaled $2.51 billion, with company guidance of $2.45 billion to $2.55 billion for 2023.

“New 4Q22 results for Plains All American show why focusing on core basins is key,” he wrote in the East Daley Data Insights newsletter. “The Permian-focused midstream giant reported strong earnings, benefiting from its recent transaction with Oryx.”

Plains merged most of its Permian Basin assets with Oryx Midstream Holdings in July 2021. The company expects Permian production growth of 500,000 bbl/d in 2023, with an assumed WTI price of $82.50/bbl.

More crude to move

Plains attributed the quarterly, year-over-year EBITDA bounce of 19% to higher volumes across its pipeline systems, particularly gathering lines in the Permian. Gathering volumes rose almost 300,000 bbl/d over 2021, with volumes expected to increase another 350,000 bbl/d in 2023.

TC Energy’s Keystone pipeline was out of service following a spill in December, which led to some of its crude volumes diverted to Plains Canadian operations. On the earnings call, Jeremy Goebel, executive vice president and chief commercial officer, described the impact as modest and would be seen in first-quarter 2023 results.

Long-haul volumes are expected to rise 300,000 bbl/d to 1.51 MMbbl/d in 2023 due to higher utilization on the Cactus I and Cactus II pipelines, as well as increased volumes on the Wink-to-Webster line. Rates are also expected to rise on pipelines taking crude from the Permian.

“We see incrementally higher rates on pipes headed directly to the Gulf Coast and a flattish Canadian business as PAA deals with lower NGL prices and tighter crude differentials,” O’Donnell wrote. Other projects coming online, such as the TransMountain pipeline, are expected to put a dent in volumes in Canada.

In the fourth quarter, Plains saw EBITDA on its NGL segment rise 7% year-over-year. That was due to higher throughput at certain fractionation, gas processing and storage assets. For the year, EBITDA for this segment totaled about $518 million—a huge jump from $285 million in 2021. For 2023, however, Plains expects that figure to drop to about $420 million as NGL fractionation spreads tighten.