Oil pipeline operators’ 2011 profits soar to record
Oil pipeline operators’ net income soared to an all-time high of $6.1 billion, a 33.3% increase from 2010 achieved on the back of a nearly 12% increase in operating revenues. The resulting earnings as a percent of revenue of 48.6% were also a record. The strong bottom line coincided with a more than 47% drop in changes to carrier property, as companies pulled back from major additions.
Natural gas pipeline operators meanwhile saw their profits slip more than 6% from 2010’s high to less than $4.9 billion. The dip in net income came despite a 3.8% increase in revenues, which reached more than $20.5 billion, their highest level since 2007 (Fig. 1).
Natural gas pipeline companies’ weaker bottom lines, in contrast to oil carriers, came at least in part as a result of surging capital expenditures, with additions to plant totaling more than $14.4 billion (a 178% increase from 2010). Roughly $6.35 billion of this total, however, comprised just two projects; expansion at Florida Gas Transmission and building the Ruby Pipeline. Expenditures on operations and maintenance rose 5.3% to slightly more than $7 billion. Proposed newbuild mileage, however, was just 50.3% of 2010’s announced build, while planned horsepower additions of 184,405 were 79% of 2010’s total.
The easing in anticipated demand saw overall estimated $/mile pipeline costs slip nearly 30% to $3.1 million. Pipeline labor remained the single most expensive per-mile item, despite easing in absolute terms by the same 30% to roughly $1.38 million/mile.
The balance between estimated and actual costs narrowed for both pipeline and compressor projects completed in the 12 months ending June 30, 2012. Actual land pipeline costs varied from projected costs by only $50,000/mile, with lower than expected material and miscellaneous costs cancelling out labor costs that remained higher than expected. Actual compressor station costs were 7.2% less than estimated costs for projects completed by June 30, 2011. The only cost area that was higher than anticipated was land. Read More