In last week’s issue of Midstream Monitor, we released our annual midstream rankings with DCP Midstream coming out on top of both the natural gas processor and natural gas liquids (NGL) producer lists.

This week, we spoke with the company’s chairman, president and chief executive, Wouter van Kempen, on how DCP Midstream was able to become the first company in the history of our rankings to top both lists.

In 2012, DCP Midstream processed 6.1 billion cubic feet per day of gas, representing more than 12% of gas processed in the continental U.S. DCP’s liquids production in 2012 was 401,914 barrels (bbl.) per day, representing about 17% of NGL production in the continental U.S.

Although producers have bemoaned the fact that the explosion in production of gas and NGLs have kept prices relatively undervalued the past few years compared to the start of the shale gale, for midstream operators this hasn’t been as much of an issue.

“We continue to see a need for additional capacity in the various regions in which we’re operating,” van Kempen tells Midstream Monitor. He noted that while gas-directed rig counts are down with more producers focusing on liquids and crude production, associated gas volumes are also high and are requiring new infrastructure in plays such as the Eagle Ford shale, the Permian basin and DJ basin. In addition, dry gas production remains high because of the continued improvements in drilling efficiencies.

“Prices have come down because production of gas and NGLs continues to increase in the U.S. We think NGL production will be north of 3 million bbl. per day sometime in the next several years,” he said.

While short-term prices remain a large focus for every company in the industry, van Kempen said they shouldn’t completely dictate decision making by midstream companies. “You have to look at the macro view when building long-lived assets that are going to be around for 30 to 50 years. At the same time, you do need to think of how to protect your downside on the short-term for prices so you have opportunities to mitigate this downside while keeping the upside open. It really comes down to a question of whether you believe in the basin and industry.”

The company has executed on a lot of growth projects, and that is paying off even as the industry recovers from a pricing slump. As a result of production increases, the DCP Midstream enterprise installed a 200 million cubic feet (MMcf) per-day processing plant in the Eagle Ford earlier this year, with another 200 MMcf per-day plant under construction in the play. In addition, the enterprise is building a 110 MMcf per-day plant in Weld County that will be expanded to 160 MMcf per day immediately upon completion of construction. The company’s 75 MMcf per-day Rawhide Plant in Glasscock County, Texas, began commercial operation during the third quarter. The company is also set to build the 200 MMcf per-day Lucerne II Plant in Weld County, Colorado, which is expected to be in service in 2015.

These facilities are being built to handle not only current production levels, but also increased end-user demands as the petrochemical industry completes its own infrastructure build-out over the next few years. The company has a super-system strategy in place, where it seeks to achieve critical mass through interconnected infrastructure in various plays throughout the country, allowing it to provide producers with a full complement of midstream services.

DCP Midstream had its largest organic capital deployment in its history in 2012 when it was more than $2.5 billion, with the largest investment being the $1 billion Southern Hills and $1 billion Sand Hills NGL pipeline projects, which are one-third owned by DCP Midstream and its joint venture owners Phillips 66 and Spectra Energy. Combined, these pipelines have the capacity to transport more than 375,000 bbl. per day, which helped make the company the third largest operator of NGL pipelines in the country, van Kempen said.

While large infrastructure projects get the headlines, he told Midstream Monitor that the real focus for the company is on what it calls operational excellence. “It takes an amazing amount of work to build the NGL pipelines and our new processing plants. And, when you go through a huge growth period in your company it is very exciting, but at times people don’t focus as much on the day-to-day aspects. These day-to-day operations are what earn us the right to grow our company. You always have to wake up and think about what is best for the customer.”

The company is also proud of is its safety record, which is part of its focus on operational excellence. “We had record safety performance in 2012. … If you compare our safety record with that of our peer companies, ours really stands out,” van Kempen said. “In the end, it’s all about making sure that 3,200 people make it back home safe to their families every night, and our employees have done a really good job.”

With a footprint that spans 18 states, the company has primarily focused on organic growth projects to expand its scope in the regions it currently operates. That is not to say that the company will rule out potential new acquisitions, which it has completed in the past. In order for DCP Midstream to enter a new play or make a new acquisition, the deal has to present a stronger opportunity than those currently presented by organic projects.

“We look at anything and everything, not only in the basins and shales that we play in, but also other areas throughout the country. The two major areas that we currently don’t operate in are the Marcellus and Bakken shales. We’ve had a number of opportunities to enter both basins, but haven’t yet seen the opportunity that we believe is the right one for us,” van Kempen said.

Currently, the company is focused on gas and NGL services, and while DCP Midstream is open to potential opportunities when it comes to crude oil, it is pleased with its current focus on gas and NGLs. “All of the regions that we play in have multiple hydrocarbons, and there is a lot of crude drilling. We continue to look at ourselves as a gas gatherer and processor and an NGL infrastructure organization.

“Could there be opportunities on the crude side of the house? That’s possible, but at the same time, we have a tremendous amount of opportunities around gas and NGLs, and that will always be the main focus of our company,” he said.

Contact the author, Frank Nieto, at fnieto@hartenergy.com