DCP’s Waldheim: Strong Customer Relations One Of The Keys To Success

Last week, DCP Midstream retained its ranking as the Top NGL Producer in Midstream Monitor’s annual rankings. This marked the fourth consecutive year that the company achieved this ranking, largely because of its positioning in the top basins in America.

This all-encompassing presence in the midstream has been garnered from its close relationships with producers, Bill Waldheim, president of the company’s Northern Business Unit, told Midstream Monitor.

“First and foremost, we aim to be attentive and serve our customers well so they will want to continue to do business with us. A big part of that is good customer service, good reliability and quick well connects. We also try to be fast to act and build out infrastructure for their benefit. DCP has really ramped up its capital spending in the past few years, and that’s a reflection of us wanting to serve our customers,” he said.

In the few regions where DCP isn’t active, such as the Marcellus, Utica and Bakken shales, Waldheim said the company is attempting to build upon existing relationships to enter each play.

“We have relationships with most of the major producers in our footprints so we would like to build upon those relationships and leverage them into these new growth areas. We’ve been talking to a lot of producers and are trying to work with them to determine what their plans are for developing these areas. What DCP brings to the equation is a service offering that covers gathering, processing and, if needed, marketing of both gas and liquids. In essence, we offer cradle-to-grave services. We’ve got the building blocks to be successful; we just need to put the piece together of the needed services our producers desire and make it happen,” he said.

The company faces a tougher challenge gaining an advantageous entry point to the Marcellus given that many of the players have already positioned themselves in the heart of the play. By comparison, the Utica shale is a bit more open and it is likely that DCP will focus on this play over the Marcellus for the time being.

Last year, it appeared as though DCP Midstream had gained entry into the Marcellus through a joint venture with EQT Corp. that would build gas processing and related liquids infrastructure for EQT projects in the Marcellus and Huron shales.

However, the company pulled out of this JV earlier this year after EQT made a 19 percent cut in its 2011 capital spending and altered its strategy to focus on more of its E&P core projects. “EQT originally wanted to have a midstream joint venture where both parties would contribute capital dollars to the build-out of gathering and processing infrastructure. As we began discussions commodity prices were higher, and as discussions moved forward through 2010 commodity prices moved lower. In our opinion, EQT then found itself in a position where their cash flow to support their drilling program diminished, and they shifted focus away from funding a midstream business,” Waldheim said.

While the dissolution of this potential joint venture caused the company to reconsider how it would enter the Marcellus, Waldheim said that DCP’s activities in the Granite Wash, Woodford Cana, Eagle Ford, Permian basin and DJ basin kept the company busy and focused on other regions. “There’s no shortage of projects within DCP Midstream, and it’s just a matter of the right time and place to enter other areas. Our general strategy is if there’s a good growth area for the midstream business, we’ve got the largest midstream business in North America, and we want to be there.”

This strategy has obviously served the company well, but has its own challenge: namely, making sure that the gathering and processing infrastructure keeps up with the funds being spent on the E&P side.

“We work very closely with our customers. They share confidential information with us regarding their plans, and we work with them on the contract structures and commitments that are necessary for us to spend capital. We look to co-invest with our E&P customers to support the drilling programs being pursued,” Waldheim said.

Two areas that DCP Midstream is investing heavily in are the DJ basin and the Eagle Ford shale. The company is in the midst of enlarging its super-system by building the LaSalle natural gas processing plant, which will be its eighth in the DJ and increase the total processing capacity to close to 500 million cubic feet per day (MMcf/d). In the Eagle Ford, the company is plumbing its five processing plants together to create a super-system while building the 200 MMcf/d Eagle plant.

Although the two plays are similar with their liquids-rich production, they are very different when it comes to infrastructure, according to Waldheim. “The DJ basin has been an area that has reinvented itself over the years and has been an ongoing producing area for many years. Every time we count it out, it reinvents itself with new technology and capabilities. The Eagle Ford is pretty much all brand new infrastructure that’s going in around a shale that’s just now being exploited and produced. The capital that has to go into the Eagle Ford is a lot higher on the gathering and processing and crude oil takeaway sides of the business. A lot more of the basics of the gathering and delivery systems have to be put together to produce the Eagle Ford, whereas a lot of that is already in place in the DJ basin.”