Born and raised in Midland, Texas, and a veteran of four to six oil booms by his count, Nuevo Midstream president and CEO Jay Lendrum says there is one thing that sets the latest boom apart from the others, at least for the midstream sector: It has finally become a service industry.
“If you were to ask somebody in the Permian Basin back in the ‘60s, ‘70s, ‘80s, would you define what we’re getting today as good service? They’d say absolutely not,” Lendrum said recently at Hart Energy’s DUG Permian conference. Back then, he said, the midstream industry had a take-it-or-leave it attitude. “We have now changed into a true service business, and that’s what we all have to focus on. We have to be out in front, and we have to focus on serving our customers and serving our producers.”
And with the “newest most amount” of processing capacity in the basin, Nuevo has contracts to service four of the biggest producers in the Delaware Basin, including Concho Resources Inc., Cimarex Energy Co., ConocoPhillips and Chevron Corp., and that in itself is seen as a feat, Lendrum said.
“It’s a challenge, but it’s also an accomplishment that our people have achieved by getting these major companies to accept a private company like Nuevo,” he said.
A Houston-based company formed in 2011 and owned by EnCap Flatrock Midstream, Wells Fargo Energy Capital and a management team of oil and gas veterans, Nuevo has two cryogenic gathering and processing plants in Reeves County, Texas, with a combined 300 million cubic feet per day (MMcf/d) capacity. The company has built more than 140 miles of pipeline in the last three years.
“There are 50 rigs running in our footprint,” Lendrum said, citing an almost 300% growth in horizontal rigs in the company’s capture area since 2011.
Noting the multiple stacked pays in the Delaware Basin and the significant recoverable reserves that would offer generations of drilling inventory and long-term potential for midstream, Nuevo is planning to accommodate producers with additional plants on its 165-acre site.
“As we go forward, we can see a clear path taking us up to about a Bcf [billion cubic feet] a day of processing” in the next three to five years, Lendrum said.
The company is currently receiving bids on a 200 MMcf/d cryogenic plant expected to go online in 2015 and has another 400 MMcf/d plant planned for 2016.
“We have very reliable drilling projections,” Lendrum said. “We have reliable forecasts that are expected, anticipated production not only in the short term but in the midterm and long term as well. I feel very comfortable with what we have.”
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