Plains All American Pipeline gets go-ahead to export condensate

Significant updates from Plains All American Pipeline's 4Q14 earnings (Part 6 of 7)

(Continued from Part 5)

Key update: PAA gets government approval to export condensate

Plains All American Pipeline (PAA) announced in its earnings call that during 4Q14, the US government approved its request to export condensate, a super light oil.

Harry Pefanis, president and chief operating officer of PAA, said in the earnings call, “During the fourth quarter we received confirmation from the BIS [Bureau of Industry and Security] that condensate processed at our Gardendale facility meets definition of a product that can be exported. Today, we have not exported any processed condensate; however, we believe we are well positioned to segregate the processed condensate and to export the product when market conditions warrant.”

The elasticity of the US government’s decision on crude exports started loosening last year after Plains All American’s peers Enterprise Products Partners (EPD) and Pioneer Natural Resources (PXD) received approval to export condensates.

PAA and EPD are midstream companies. As top holdings of the Alerian MLP ETF (AMLP), they make up ~17.5% of the ETF. Plains GP Holdings, L.P. (PAGP) is the general partner for Plains All American Pipeline, L.P. PXD is an upstream company and a component of the Energy Select Sector SPDR ETF (XLE).

Plagued by lawsuits

Plains All American Pipeline (PAA) is facing a couple of lawsuits that have garnered publicity. The first one challenges the company’s status as a common carrier with respect to its Diamond pipeline.

The second lawsuit challenges the existence of valid permits for the company’s Bakersfield rail terminal

New pipelines

On February 5, Plains All American announced its intentions to construct two new Delaware Basin pipelines and their related gathering systems. These pipelines will expand the company’s existing Blacktip station. They’ll also support the Basin Pipeline from Wink to Midland and the new pipeline from Monahans to Crane.

The Avalon extension pipeline will extend the Avalon pipeline from the Blacktip station in southeast Loving County, Texas, into Culberson County, Texas. It will be capable of transporting crude up to 100,000 barrels per day (or bpd) from northern Loving and Culberson Counties. The pipeline is expected to come into partial service in July 2015.

The Stateline pipeline will connect Culberson County to Wink, Texas, and run along the Texas-New Mexico state line. It will be capable of transporting batched crude and condensate up to 150,000 bpd. The pipeline is expected to come into partial service in early 2016.

Continue to Part 7

Browse this series on Market Realist:

• Part 1 - Plains All American Pipeline: 4Q14 revenues fall below estimates

• Part 2 - How did Plains All American Pipeline’s segments perform in 4Q14?

• Part 3 - Plains All American Pipeline revises its 2015 guidance