Production, exports bring strong returns
Surging crude oil production and exports helped Houston pipeline operator Plains All American Pipeline LP to realize strong returns in 2018.
Ranked at No. 4 on the Chronicle 100, Plains reported a healthy $2.2 billion profit on more than $34.1 billion of revenue last year — more than doubling the $856 million profit on $26.2 billion of revenue the company made in 2017.
Plains GP Holdings LP, a holdings company that owns Plains All American Pipeline, experienced a similar financial performance. The holdings company made a $334 million profit in 2018, compared
with a $731 million loss in 2017, earning it a rank of seventh place on the Chronicle 100.
With nearly 18,000 miles of crude oil and natural gas liquids pipelines in the United States and Canada, Plains is known as one of the largest crude oil pipeline and storage terminal operators in North America. Although the majority of the profitability of the company comes from pipelines and facilities fees, more than 96 percent of its revenue comes from buying and selling the products.
Plains’ supply and logistics arm buys crude oil and natural gas liquids from producers and sells them to refineries, exporters, resellers and other buyers. Such transactions accounted for $32.8 billion of the company’s revenue in 2018 —30 percent more than the $25.1 billion of revenue in 2017.
Over the years, the trick has been to anticipate supply and demand shifts, seasonality, regional surpluses and shortages and other factors that cause dramatic changes in commodity prices. Record production in the Permian Basin of West Texas and crude oil exports along the the Gulf Coast worked in favor of Plains in 2018.
Plains owns more than 5,000 miles of pipeline in Permian Basin where the company reported moving an average of 3.7 million barrels of crude oil per day to storage terminals it owns in Cushing, Okla., or directly to refineries and exporters along the Gulf Coast.
During a recent investors call, Plains CEO Willie Chiang attributed the 2018 performance to strong coordination between the company’s operations, engineering and commercial groups in the Permian Basin and elsewhere.
“These efforts across the U.S. and Canada, combined with record levels of throughput on certain of our assets, enabled us to participate in capturing regional location differentials, particularly in the second half of the year,” Chiang said.