Six Pipeline Companies Cut $1.9 Billion From Their 2020 Budgets
Six pipeline operators have cut a combined $1.9 billion from their 2020 budgets as record low oil prices and weakened demand from the coronavirus dampens plans for new projects, a new research note from Houston energy investment banking firm Simmons Energy reported.
Noble Midstream Partners, Rattler Midstream, Targa Resources, EnLink Midstream, Oneok and Pembina Pipeline made the budget cuts over the past two weeks — representing an overall 30 percent cut in planned capital expenditures for new pipeline and storage projects in 2020, researchers reported.
Canadian pipeline operator Pembina made the largest cut of the six companies, slashing nearly $700 million, or 43 percent, from its nearly $1.6 billion budget. The company now plans to spend nearly $900 million this year.
The pipeline companies, which make money based on the products they move and store, are facing challenges at both ends of their businesses.
An oil war between Russia and Saudi Arabia has exacerbated a crude oil supply glut in global markets and sent prices falling to the low $20 per barrel range, signaling that exploration and production companies will lower drilling activity and ship less.
Meanwhile, the global coronavius pandemic has dramatically cut demand for crude oil, natural gas, gasoline, diesel, jet fuel and other products made from crude oil and natural gas.