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Plains All American Announces Pipeline Capacity Expansion
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Plains All American Pipeline, L.P. (PAA - Free Report) announced the capacity expansion of the Cactus Pipeline to nearly 390,000 barrels per day from around 330,000 barrels per day.Capacity expansion of the pipeline is anticipated to be completed in the third quarter of 2017.
This 310-mile, 20-inch crude oil pipeline runs from McCamey to Gardendale, TX, where it joins the Eagle Ford pipeline, developed jointly by Plain All American and Enterprise Products Partners L.P. (EPD - Free Report) .
Plains All American has regularly increased Cactus’ capacity to meet growing demand for midstream services. This latest expansion will help Plains All American transport higher production volumes from the Permian Basin to Corpus Christi and other delivery points.
Price Movement
Units of Plains All American have gained 62.4% over the last one year, outperforming the Oil & Gas-Production/Pipeline MLP industry’s gain of 45.2%.
Plains All American continues to enjoy a favorable financial position. The partnership exited third-quarter 2016 with committed liquidity of $2.5 billion. Apart from utilizing funds in growth projects, a stable financial position allows the partnership to offer distributions at regular intervals. This is boosting investor interest in the stock, and in turn its price.
Industry Outlook for 2017
The industry has seen the addition of a significant amount – several billions of cubic feet per day – of new natural gas processing capacity using state-of-the-art equipment. Given that the price of liquids is tied to oil, price is a bigger consideration than processing capacity at this point.
As per an Energy Information Administration report, U.S. crude oil production is projected to average 8.8 million barrels per day in 2017. Brent crude oil prices are expected to average $52 per barrel, which reflects an upward correction of nearly 21% from the 2016 levels, while West Texas Intermediate (WTI) crude oil prices are predicted to be an average $51 per barrel.
Expectations of tighter crude demand and supply imbalances, production cuts announced by the Organization of Petroleum Exporting Countries, moderate but steady demand growth in the U.S., and global oil demand bode well for the industry in 2017. However, these factors may be offset to a considerableextent if Iran brings more production on line. In such a scenario, the U.S. will obviously ramp up production following the increased rig count, leading to yet another supply glut.
In 2017, higher rig activity is anticipated in the Marcellus and Utica shale regions than the Haynesville, Fayetteville and other older shale gas basins, where there’s still a huge amount of untapped natural gas. It has become more expensive to get the gas out of the ground in the older shale plays, which is why operators have shifted focus from these areas.
Zacks Rank &Key Picks
Plains All American sports a Zacks Rank #2 (Buy). A couple of other favorably placed stocks in the same space include Archrock Partners, L.P. and Enable Midstream Partners, LP .
Enable Midstream’ 2016 estimates have increased from 71 cents to 72 cents over the past 60 days. The company carries a Zacks Rank #2.
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Plains All American Announces Pipeline Capacity Expansion
Plains All American Pipeline, L.P. (PAA - Free Report) announced the capacity expansion of the Cactus Pipeline to nearly 390,000 barrels per day from around 330,000 barrels per day.Capacity expansion of the pipeline is anticipated to be completed in the third quarter of 2017.
This 310-mile, 20-inch crude oil pipeline runs from McCamey to Gardendale, TX, where it joins the Eagle Ford pipeline, developed jointly by Plain All American and Enterprise Products Partners L.P. (EPD - Free Report) .
Plains All American has regularly increased Cactus’ capacity to meet growing demand for midstream services. This latest expansion will help Plains All American transport higher production volumes from the Permian Basin to Corpus Christi and other delivery points.
Price Movement
Units of Plains All American have gained 62.4% over the last one year, outperforming the Oil & Gas-Production/Pipeline MLP industry’s gain of 45.2%.
Plains All American continues to enjoy a favorable financial position. The partnership exited third-quarter 2016 with committed liquidity of $2.5 billion. Apart from utilizing funds in growth projects, a stable financial position allows the partnership to offer distributions at regular intervals. This is boosting investor interest in the stock, and in turn its price.
Industry Outlook for 2017
The industry has seen the addition of a significant amount – several billions of cubic feet per day – of new natural gas processing capacity using state-of-the-art equipment. Given that the price of liquids is tied to oil, price is a bigger consideration than processing capacity at this point.
As per an Energy Information Administration report, U.S. crude oil production is projected to average 8.8 million barrels per day in 2017. Brent crude oil prices are expected to average $52 per barrel, which reflects an upward correction of nearly 21% from the 2016 levels, while West Texas Intermediate (WTI) crude oil prices are predicted to be an average $51 per barrel.
Expectations of tighter crude demand and supply imbalances, production cuts announced by the Organization of Petroleum Exporting Countries, moderate but steady demand growth in the U.S., and global oil demand bode well for the industry in 2017. However, these factors may be offset to a considerableextent if Iran brings more production on line. In such a scenario, the U.S. will obviously ramp up production following the increased rig count, leading to yet another supply glut.
In 2017, higher rig activity is anticipated in the Marcellus and Utica shale regions than the Haynesville, Fayetteville and other older shale gas basins, where there’s still a huge amount of untapped natural gas. It has become more expensive to get the gas out of the ground in the older shale plays, which is why operators have shifted focus from these areas.
Zacks Rank &Key Picks
Plains All American sports a Zacks Rank #2 (Buy). A couple of other favorably placed stocks in the same space include Archrock Partners, L.P. and Enable Midstream Partners, LP .
Archrock Partners’ 2016 estimates have increased from 68 cents to 73 cents over the past 60 days. The company flaunts a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enable Midstream’ 2016 estimates have increased from 71 cents to 72 cents over the past 60 days. The company carries a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>