Business Strategy and Outlook| Stephen Ellis |
We believe the returns from Plains All American's pipeline network have been materially negatively impacted by the oversupply of Permian oil takeaway capacity, which we expect to persist for years. In a bit of a setback, Plains will see higher Permian volumes in 2022, but the financial benefit will be more muted as the volumes are moving from fully owned assets to joint-venture assets, meaning Plains will only see a fraction of the earned tariffs. As a result, improved operating leverage from higher Permian volumes is essentially shelved until 2023. Still, Plains is pursuing a balanced capital allocation approach, including a "no regrets" growth capital investment framework and a thoughtful distribution of its remaining excess cash flow.