NEW YORK, April 29 (Reuters) - Enterprise Products Partners LP on Wednesday slashed its capital expenditures for 2020 by about $1 billion as oil demand plummeted due to the coronavirus pandemic, but the midstream company said volumes across its oil pipelines have not yet declined.
Oil demand has crashed about 30% globally as the coronavirus pandemic has restricted travel and sent crude prices briefly into negative territory last week as storage across the world fills rapidly.
Enterprise said it expects crude oil production out of the Permian basin, the largest U.S. shale play located in Texas and New Mexico, to drop in coming months and said gathering and processing volumes are likely to decline.
About 1.5 million barrels per day (bpd) of crude in Enterprise’s pipelines in the Permian Basin are covered under long-term contracts, said Jim Teague, co-chief executive officer at Enterprise, on a first-quarter earnings call with analysts. Those take-or-pay agreements require customers to either supply oil or pay a specific amount to Enterprise.
“Tanks have been converted to crude oil services. Our people have found places to store crude oil that two months ago, we didn’t even know existed,” he said.
Earlier this month Enterprise said it will give oil companies hunting for places to store crude the chance to ship barrels on its Seaway pipeline from the Gulf Coast to Cushing, Oklahoma, the main U.S. storage hub.
The company said on Wednesday Seaway was “virtually full.”
Enterprise reported earnings-per-share of 61 cents. It reduced its guidance for total 2020 growth capital investments by approximately $1 billion to a range of $2.5 billion to $3 billion and said six potential joint ventures are being negotiated, which could further reduce capex.
Regulators in Texas, the largest U.S. oil-producing state, are considering producer calls for cuts. Texas energy regulators will next week vote on the proposal to reduce state oil output. (Reporting by Devika Krishna Kumar in New York Editing by Marguerita Choy)