From Houston Business Journal

Houston-based Plains All American Pipeline LP (ticker: PAA) has raised its projected spending for 2017 by $100 million.

The company said in its second-quarter earnings results that it now expects to spend $900 million on growth projects in 2017.

That’s partly to pay $50 million for a newly announced joint-venture pipeline expansion Plains is working on with Houston’s Phillips 66 (NYSE: P66) in Oklahoma, said Willie Chiang, Plains’ chief operating officer.

That project will expand the STACK Pipeline capacity from 100,000 barrels per day to 250,000 barrels per day, though if the demand is there it could be built for up to 350,000 barrels per day. It is expected to enter service in the fourth quarter of this year, Chiang said.

It also includes an extension of the pipeline from the STACK line’s current origin point in Cashion, Oklahoma, to a new origin about 35 miles west, deeper into the STACK play. The line terminates in Cushing, Oklahoma.

Oklahoma was one of the regions that Phillips 66’s president, Tim Taylor, said the company sees opportunities for midstream growth.

Even with the spending increase, 2017’s expansion spending is well below Plains’ historical levels. The company spent about $1.4 billion on growth in 2016, and a peak of $2.2 billion in 2015.

The first quarter was a difficult one, Plains CEO Greg Armstrong said on the earnings conference call. That’s consistent with the expectations he laid out in the call for the prior quarter.

“What we did not anticipate was weakness in our natural gas liquids business that would make the first nine months or so of 2017 even more challenging than we thought,” Armstrong said.

Warmer weather, increased competition and tighter price spreads between Canada and the U.S. drove the segment’s troubles, Armstrong said.

The company is changing the way it manages its NGL inventory and contracts in order to limit the downsides when things go wrong like this, but that also means the company can realize less benefit when things go better than expected, Armstrong said.

Plains has been fairly active recently, as interest in midstream projects picks up on the end of the oil downturn. In addition to the STACK expansion, the company is looking at shipper interest for a new pipeline moving crude from the Permian Basin into Cushing.

Earlier this year, the company completed a joint venture acquisition of Advantage Pipeline LLC, and it bought Alpha Holding Company LLC, the owner of the Alpha Crude Connector system, for more than $1.2 billion. Plains also plans to expand the capacity of its Cactus Pipeline and the BridgeTex Pipeline Company LLC, of which Plains owns half.


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