Plains boosts 2020 earnings forecast on improved oil transportation outlook

NEW YORK (Reuters) - Plains All American Pipeline LP PAA.N on Monday raised its 2020 earnings forecast about 3%, citing an improvement in its anticipated oil transportation segment volumes and earnings.

Plains increased its adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) estimate to about $2.585 billion, about $85 million more than its forecast in August.

Transportation segment adjusted EBITDA is expected at about $1.62 billion, above its previous estimate of $1.54 billion.

Some oil pipeline and transportation companies have deferred or canceled projects as U.S. crude production slid during the coronavirus pandemic.

Plains’ preliminary 2021 forecast for adjusted EBITDA is about $2.2 billion, based on estimated oil prices of about $40-$45 per barrel.

“Underpinning our outlook is an assumption for the crude oil price environment and producer activity levels to remain relatively unchanged throughout the majority of the year,” Chief Financial Officer Al Swanson said during Plains’ quarterly earnings call.

“Therefore, an acceleration of demand recovery and corresponding improvement in commodity prices relative to the current levels would be a net positive to our outlook.”

The U.S. oil and gas rig count, an early indicator of future output, rose 64% in October for the third straight month to 526 rigs, but this was still less than a year ago due to coronavirus-related cutbacks.

Plains estimated production in the Permian shale basin, the biggest in the country, to remain roughly flat through the fourth quarter and 2021, and warned that other basins could have extended declines.

“Largely, what you’re seeing most producers do is ... they’re stabilizing now using drilled and uncompleted wells and they’ll try to do that throughout next year,” Executive Vice President Jeremy Goebel said.

Plains also announced a $500 million common equity repurchase program and said it would target about $600 million or more asset sales in 2021.

For the rest of 2020, Plains intends to allocate up to $75 million for repurchases. For 2021 it plans to allocate up to 25% of free cash flow after distributions for repurchases.

Reporting by Devika Krishna Kumar in New York; Editing by Richard Chang