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SCOOP/STACK Midstream Developments. Pipeline Projects Driving Gas Prices. Challenge of Getting Water for Fracking12/20/2018
Positive Outlook on SCOOP / STACK’s Blue Mountain Midstream’s Pipeline System
Blue Mountain Midstream LLC Company operating in Merge play as well as in SCOOP and STACK plays, OK, continues to be a “fast-growing business”. Being a 100% subsidiary of the Riviera Resources, Inc., a recent spin-off from Linn Energy, Blue Mountain Midstream is said by David Rottino, Riviera’s president and CEO, during the recent company’s earnings call to remain one of its “tremendous growth assets”.
Blue Mountain provides natural gas, crude oil and natural gas liquids service solutions in the mentioned area. (See this on Rextag's map above).
Christmas Season Decorative Lighting and Power Demand. Does This Still Affect Gas Prices? (Or Have New Pipeline Projects Changed this Pattern?)
According to research (by EnVantage Inc.), a 10% increase in power demand near Christmas and the New Year was historically attributed to decorative lighting. Although diminishing due to the slow adoption of LED, this year the effect is hard to trace due to extreme volatility. Waha Hub prices were fluctuating from $3.85 /MMBtu on Nov. 13 down to $0.30 /MMBtu in two weeks and up to $1.36 /MMBtu by December 4.
Most of the movement is attributed to the excessive gas supply from Midland basin. The latter was a by-product (associated gas) from additional oil output delivered from Midland to Colorado City and Wichita Falls along newly introduced Sunrise Pipeline expansion by Plains All American LP. Estimated at over 750 MMcfd it contributed to the Waha plunging prices.
NGL prices likewise are thought to be affected by prospects of another group of pipelines under construction: Mariner East 1 and Mariner East 2 pipelines by Sunoco. Located in Pennsylvania, the pipelines are intended to facilitate the transfer of Natural Gas Liquids from the Utica and Marcellus Shale Formations to ports on the East, where ethane, butane, pentane, propane mixes will be exported.
Fracking Water Demand: Challenges and Their Treatment Approaches
It has been pointed out by experts that “rig count correlates with water source needs”. If a region lacks water-handling assets then development slows to a stop. Companies need to procure both water to drill and means of its future disposal. Cost is the main concern here.
The issue may be resolved by one of the following approaches:
- Adjusting the existing pipelines to become water-dedicated for bringing new water to the area.
- Use treated water from nearby municipals. (Several projects are being discussed in Oklahoma City in the Midcontinent, Carlsbad, N.M., and Odessa and Midland, Texas). However, supply of the treated water is quite limited so this will remain a niche market.
- Reuse of already produced water for frack jobs. This approach can be taken by regional players who would provide dedicated systems in place to handle all: gas, oil and water for their local customers.
A hub to DAPL near Trenton, (ND) has been put in operation.
Nuevo Midstream will add 100 miles of gathering pipeline in Gonzales, Lavaca, and Dewitt counties to its Eagle Ford assets.
On June 16 Targa Resources Corp. decided to acquire Lucid Energy Group, located in the Permian Basin, which is a part of Riverstone Holdings LLC and Goldman Sachs Asset Management. Firstly, Targa enlarged due to the recent “blot-on” acquisition of Southcross Energy in the Eagle Ford for $200 million and it will become bigger thanks to the $3.55 billion cash transaction. Targa’s financial position allowed it to utilize convenient opportunities to extend its company so it bought #Lucid using available cash and debt with an estimated pro forma year-end 2022 leverage around 3.5 times. According to Targa’s estimates, the acquisition of Lucid will increase the number of natural gas pipelines by 1,050 miles and add about 1.4 Bcf/d of cryogenic natural gas processing capacity in service or under construction located mainly in Eddy and Lea counties of New Mexico. The investment-grade producers source approximately 70% of current system volumes. According to the press release, a full-year standalone adjusted EBITDA is expected to be between $2.675 billion and $2.775 billion and reported year-end leverage ratio of about 2.7 times. Targa’s updated financial expectations assume NGL composite prices average $1.05 per gallon, crude oil prices average $100/bbl, and Waha natural gas prices average $6 per MMBtu for the remainder of 2022.
Your team’s ESG performance can be greatly improved applying the asset co-location analysis within upstream or midstream use cases. This has been a topic for a discussion at Rextag’s ‘Is ESG Improvement Next Door?’ webinar. We reviewed some cases like curbing gas flaring or renewable energy sourcing to power the fossil fuel infrastructure. Many combinations are available with access to the data Rextag provides on wells, acreages, power lines, substations, and such renewable infrastructure as wind turbines, methane landfills, etc.
BPPlc agreed on June 13 to exit the Canadian oil sands in an asset swap with Cenovus Energy Inc. potentially worth up to CA$1.2 billion. 50% non-operated interest in the #SunriseOilSands project will be sold by BP in an agreement reached with Cenovus Energy, a company based in Alberta. Two companies agreed on the following conditions: total consideration for the transaction includes CA$600 million in cash, additionally, a contingent payment with a maximum aggregate value of CA$600 million expiring after two years, and concerning Cenovus, it will have a 35% position in the undeveloped Bay du Nord project offshore Newfoundland and Labrador. Current production from the Sunrise Oil Sands asset is about 50,000 bbl/d and the company anticipates achieving a nameplate capacity of 60,000 bbls/d through a multi-year development program.