SAN ANTONIO—The process of emerging from the downturn provides an extra opportunity to revisit key business principles that can help midstream players: stay engaged with customers, the industry and your team.

That was the message from Stephen Morgan, vice president of TransTex Treating as he recapped factors contributing to the energy downturn for attendees at Hart Energy’s recent Midstream Texas conference. Ahead of the commodity crash, companies levered up balance sheets by outspending cash flow as Wall Street rewarded aggressive growth with high trading multiples, he said.

Principles to abide by in order to weather the storm include focusing on core competencies, gaining and retaining recurring business revenue streams and employing disciplined financial management, he said. These principles helped TransTex in that it “lost only one employee” in the downturn.

And keeping close to customers is critical—and easier—now that so-called gate guards have less traffic to handle, according to Morgan. “They’re saying that no one’s coming by,” he said. “But now, more than ever, we need to be increasing our face time with our customers.”

Andrew Deck, vice president of Permian Basin for EnLink Midstream, recalled asking: “How long is it going to take before the storm is over?” And, with slowly emerging signs of stability and a recovery in the midstream industry, posing the question, “If I’m going to reinvest my money, where am I going to get the biggest bang for the buck?”

His reply to these questions was that “the Permian Basin is the place where the comeback is starting. The Midland and Delaware basins are a contributing source of the comeback.”

In addition to the disproportionate increase in recent rig activity in the Permian coupled with the dramatic improvements in productivity per well, Deck pointed to deal flow of E&Ps buying into the Permian as “probably the most persuasive” indicator of likely success. Moreover, with breakeven prices well below current crude oil prices, he said, “prices don’t have to improve for there to be significant returns in the Permian Basin.”

In the Midland Basin, using a so-called build and buy strategy, EnLink has developed an integrated network of midstream assets that it calls the MEGA (Midland Energy Gathering Area) System. Recent additions include the Riptide processing plant in Martin County, Texas, while the Greater Chickadee crude oil gathering system is currently under construction.

In the Delaware Basin, also employing a build and buy strategy, EnLink has established a footprint based on the Lobo system acquired from Matador Resources Co. (NYSE: MTDR). The company also formed a strategic joint venture with Natural Gas Partners to expand activities in a “key area in the northern Delaware Basin,” according to Deck.

For Bob Milam, CEO of EagleClaw Midstream Ventures, the company’s entry into the Delaware came after an extensive study of rock quality, which in turn enabled it to understand competitive forces “and, more than anything, producers’ economics in the play.”

EagleClaw started constructing pipe in Reeves County, Texas, in the southern Delaware two years ago and now operates 250 miles of gathering pipe. It has two 60 million cubic feet per day (MMcf/d) cryogenic plants in operation and is constructing a 200 MMcf/d plant scheduled to be operating before the end of this year.

Recently, the company closed its purchase of Penn Tex Permian LLC. Located in the southeastern part of the EagleClaw system, the newly acquired assets “significantly increased our footprint in Reeves County, where we really made our bet with regards to understanding the rock,” Milam said.

The area was one which was “pretty void” of other infrastructure— something not uncommon in itself, he noted. “The hard part is to find an area where there is no infrastructure and where there is oil and gas.”

However, Milam showed data indicating at least six recent transactions in Reeves County. A&D activity has “really ramped up” there, where it is easier to find “much larger blocked -up acreage,” offering opportunities for producers to drill wells with prized 10,000-ft laterals, he said.

But to make a bet on where midstream will be needed, observed Milam, “you’ve got to come up with the science ahead of your completion.” To do this, EagleClaw teamed up with Silverback Exploration LLC’s technical team, whose interpretation of the area has led to a dramatic turnaround in well results—“very profitable wells at even a $30 price deck.”

The midstream investment outcome “ties back to the producers’ economics,” Milam said. Whereas historically E&Ps tended to undershoot volumes delivered to a system, with today’s advances in lateral lengths and frack designs “we’ve actually had producers turn in twice the volumes they predicted.”

As with Milam, Oryx Midstream Services’ CEO, Brett Wiggs, held out rock quality as “the No. 1 priority and most important aspect of development” leading him to opportunities in the Delaware.

The company’s current major project is the Oryx Trans Permian (OTP) system, a Federal Energy Regulatory Commission-regulated project that began being built in the southern Delaware in June 2015. The OTP provides oil gathering service at the tank battery with direct deliveries to Crane, Texas, and then on to Midland, Texas.

“We felt that we needed to make sure that we focused a solution on the producers,” recalled Wiggs. “We wanted to create optionality for those producer barrels to maximize a producer’s netback. We decided that the best markets to create that optionality were Crane and Midland.”

Wiggs said oil production in the Delaware , currently running at about 725 Mbbl/d, would likely double over a 4-6 year time frame driven by a steady increase in the rig count and by continued improvement in drilling and completion efficiencies in the basin.

Michael Latchem, CEO of Lucid Energy Group, outlined several characteristics of Oryx Midstream’s development efforts. These included focusing on areas where production is “constrained” and areas where existing relationships are strong, and securing capital sources that are scalable to support growth.

The Delaware lines up well against these because the basin is “currently underserved,” observed Latchem, and local producers are already current Lucid customers. In addition, the New Mexico portion of the Delaware is more constrained the Texas portion and New Mexico has “natural barriers to entry.”

Lucid recently announced the acquisition of assets from Agave Energy Co., which owns and operates natural gas gathering and processing assets predominantly in the New Mexico. The acquisition of Permian assets “delivers over 2,000 miles of infrastructure, half of which is in the core Delaware Basin counties of Eddie and Lea [N.M.],” Latchem said.

Lucid currently has a 200 MMcf/d cryogenic plant under construction at its Red Hills facility in Lea County, as well as permitting in process for a second 200 MMcf/d plant in Eddy County.

“We’ve effectively doubled the size of our company with the Agave acquisition,” Latchem said.

Chris Sheehan can be reached at csheehan@hartenergy.com.