Plains All American Pipeline L.P. (PAA) decided to invest $330 million in infrastructure development projects to meet the increasing production from the Eagle Ford shale in South Texas.
The project will involve construction of a new 130-mile crude oil and condensate pipeline, a marine terminal facility and 1.5 million barrels of storage capacity. The project is expected to come on-line from the fourth quarter 2012 and will be able to move 300,000 barrel per day from the western area of the Eagle Ford to Corpus Christi, Texas and other Gulf Coast markets.
The partnership has already secured a long-term throughput agreement with Chesapeake Energy Marketing, a unit of Chesapeake Energy Corporation (CHK). The partnership had given an option to Chesapeake Midstream Development L.P. to be a 25% owner of the project and also executed a Memorandum of Understanding with Flint Hills Resources for the latter’s potential joint ownership in this project.
Plains is working to develop its infrastructure and investing funds in expansion projects. For 2011 alone, the partnership has earmarked $600 million for expansion projects with an additional $90 million for maintenance capital projects.
The quarterly earnings of the partnership in the first quarter 2011 were $1.03 per unit, which surpassed the Zacks Consensus Estimate of 82 cents. The Zacks Consensus Estimate for 2011 is presently $3.54 per unit.
Plains All American Pipeline currently retains a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral rating on the stock.
Houston, Texas based Plains All American is engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas and other natural gas related petroleum products. The partnership is also involved in the development and operation of natural gas storage facilities.
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