On August 3 the pipeline operator Plains All American LP raised its 2022 profit forecast for the second time this year, as it expects a huge demand on its pipelines transporting U.S. shale oil to the Gulf Coast.
The company increased full-year adjusted earnings guidance by $100 million to approximately $2.38 billion, since it anticipates higher crude and natural gas liquids volumes.
U.S. crude oil has been in high demand in international markets with WTI crude trading at a discount to internationally-traded Brent crude, making acquisitions appealing to foreign buyers.
European buyers have snapped up the U.S. light sweet crude, the largest part of which is delivered in the Permian Basin of West Texas and New Mexico, as they depend on replacing Russian barrels.
The marginal demand today is the international market as Plains is convinced that is why prices at the Corpus Christi, Texas, export hub are selling at a premium to Houston and other export ports. The company considers that Corpus Christi is the best place with low inventories and high prices.
Plains has two crucial long-haul pipelines, Cactus and Cactus II, which deliver oil from the Permian basin to Corpus Christi. Plains CEO Willie Chiang anticipates achieving more volumes to get to its long-haul pipelines as capacity in the Permian basin increases.
Average daily crude oil volumes in the second quarter grew 30% on its Permian Basin pipelines with oilfield activity trending about 10% exceeding its initial expectations. Its shares increased 3.6% in after-hours trading on August 3 to $11.19.
Moreover, the larger pipeline rival Magellan Midstream Partners LP gave a similar view last week, saying Permian volumes on its Longhorn and BridgeTex pipelines to Houston decreased as shippers likely transported barrels to the international market. Plains' adjusted second-quarter net income allotted to common unitholders increased 29% to $210 million.
Plains All American's transportation assets primarily generate revenue through a combination of tariffs, pipeline capacity agreements, and other transportation fees. Its facilities assets generate revenue through a combination of month-to-month and multi-year agreements and arrangements which include storage, throughput, and loading/unloading fees at its crude oil facilities, and fees from condensate processing services. Also, it generates revenue through the commercial and merchant activities that supply volumes to the transportation and storage assets, although such activities are generally low margin.
Plains employed a variety of owned or, to a much lesser extent, leased long-term physical transportation and facilities assets throughout the United States and Canada in this segment, including approximately: 18,300 miles of active crude oil pipelines and gathering systems; 74 million barrels of commercial crude oil storage capacity at the terminalling and storage locations; 38 million barrels of active, above-ground tank capacity used to facilitate pipeline throughput and help maintain product quality segregation.
