However, earnings were adversely impacted by weaker than anticipated performance from its NGL marketing activities, which are included in its Supply and Logistics segment, he said.

First-quarter net income attributable to PAA was $444 million, up 120% from $202 million a year ago. Adjusted net income attributable to PAA was $224 million, down 37% from $355 million a year ago. For full year 2017 guidance, PAA expects stronger year-on-year Adjusted earnings from Transportation and Facilities segments, but its Supply and Logistics segment is to see a consecutive annual earnings drop since 2015.

While Transportation and Facilities segments are expected to see steady year-on-year earnings rise, its Supply and Logistics estimated earnings for 2017 at $230 million are less than half of $568 million in 2015.

“NGL margins were negatively impacted by warmer weather and tighter differentials between Canada and our U.S. demand markets among other factors. To address these issues in future periods, we are modifying the way we manage our inventory and implementing contractual provisions that will reduce earnings volatility and the quantity of seasonal NGL inventory we store, in exchange for partially limiting our upside potential,” Armstrong said.

“In February, we shared our view that the first six to nine months of the current year would prove challenging but that we expected to see strong improvement toward the end of 2017 as several multi-year capital projects are completed and volume growth in the Permian advances. Although our cautious outlook for the near term is proving accurate, we definitely like the way the industry is shaping up for the latter part of 2017 and beyond,” he said.

Producer activity levels in almost every area are ahead of levels included in Plains’ outlook at the beginning of the year, especially with respect to the Permian Basin, Armstrong said.

Well productivity is increasing as new wells are coming in stronger than previously modeled, he said. PAA’s outlook continues to incorporate an increasing time lag between increased drilling activity and increased production volumes as producers shift to multi-well pad operations. Accordingly, PAA continues to expect its transportation volumes to ramp up in the second half of this year.

“Consistent with our outlook, we are seeing increased interest from potential shippers for pipeline space currently available on our existing assets as well as for incremental pipeline capacity at rates that provide us an attractive return,” he said.

All of this reinforces PAA’s outlook and confidence in a back-end weighted improvement during 2017 in its fee based growth and that PAA remains on-course for a meaningful increase in year-over-year performance in 2018 and beyond, Armstrong said.

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