Plains All American has added to its Permian basin crude oil gathering asset portfolio and has sanctioned a partial expansion of its NGL debottlenecking project in Canada.
Permian basin crude oil system
A subsidiary of Plains Oryx Permian Basin LLC—a joint venture of Plains All American (PAA) and Oryx Midstream Services Permian Basin LLC (Oryx)—closed a deal July 28 to acquire Diamondback Energy’s 43% interest in OMOG JV LLC for about $225 million ($145 million net to PAA’s interest). (OGJ Online, July 13, 2021).
According to regulatory filings, the OMOG crude oil gathering and transportation system includes about 400 miles of crude oil gathering and regional transportation pipelines and some 350,000 bbl of crude oil storage in Midland, Martin, Andrews and Ector Counties in Texas.
The bolt-on acquisition in the Permian basin complements Plains’ existing geographic footprint, said Willie Chiang, chairman and chief executive officer of Plains All American as part of an earnings release Aug. 4.
For Diamondback, the sale continues a non-core asset sale process that, as of July, through announced or completed deals, has exceeded the company’s 2023 target of $1.0 billion of gross proceeds.
Acquisition of the remaining 43% interest in the Northern Midland basin gathering system further aligns the Plains Permian joint venture with Diamondback in the core of the Midland basin, PAA noted in its earnings call.
NGL expansion in Canada
Elsewhere, Chiang said, the company “took steps to improve the long-term durability and quality of [PAA’s] cash flow stream in the NGL segment” by sanctioning the debottlenecking project at the company’s Fort Saskatchewan complex and extending the duration of its contracts across the NGL portfolio.
Primary assets at Plains' Fort Saskatchewan complex near Edmonton, Alberta, include two fractionation trains with a combined design capacity of about 85,000 b/d.
The Plains Fort Saskatchewan (PFS) Train 1 debottlenecking project is expected to add 30,000 b/d of additional capacity and add connectivity to both Co-Ed Pipeline and the Fort Saskatchewan complex. PAA expects to spend about $200 million over several years on the project.
The Train 1 expansion is expected in-service in 2025. Originally envisioned to leverage existing infrastructure and add 50,000 b/d of C3+ fractionation capacity while maintaining the flexibility to deliver a propane/butane mix to Plains’ fractionation plant in Sarnia, Ont., the company is no longer pursuing a Train 2 expansion as it did not meet the company’s return threshold.
Overall, the company is maintaining its 2023 investment and maintenance capital guidance of $325 million and $195 million, respectively, net to PAA (inclusive of sanctioned NGL project).
For second-quarter 2023, PAA had net income of $293 million and net cash provided by operating activities of $888 million.