Midstream Monitor

For well more than a year, the U.S. has been in a battle of attrition with OPEC, which has pumped nearly all the oil it could to win “market share.” The result has been a flat lining of crude oil prices. For much of the shale boom, the Eagle Ford and Bakken oil—often of a much higher quality than West Texas Intermediate (WTI) and Brent—has been trapped in domestic markets. Now, with the lifting of the crude oil export ban on Dec. 18, that oil can now find a more fitting and lucrative place for its lighter, sweeter crude.
By a 65-33 vote on Dec. 18, the U.S. Senate passed a combined $1.1-trillion spending bill and a $680-billion tax extenders package that funds the government through September 2016 and lifts the 40-year-old ban on U.S. crude oil exports.The combined bill—which also extends or makes permanent scores of tax incentives for corporations and individuals—now goes to President Barack Obama’s desk for signature. On Dec. 17, the House of Representatives voted separately to approve the tax extenders package, and voted earlier Dec. 18 on the spending bill. Enactment of the spending and tax extender bills effectively brings to an end legislative business for the year.
Pipeline giant Kinder Morgan Inc. said Dec. 8 it would slash dividends by 75% to 50 cents in a move that frees up $3.9 billion a year of cash flow and likely keeps the company away from the equity markets in 2016-17. Kinder Morgan’s decision to shrink dividends may open the door for “the entire sector to do the same,” according to Tudor, Pickering, Holt & Co. in a Dec. 9 report.
After weeks of stirring the pot, opponents of the MarkWest Energy Partners LP (MWE) merger with MPLX LP (MPLX) lost the war but won $605 million in cash concessions from MPLX parent Marathon Petroleum Corp. (MPC). At a special meeting Dec. 1, MarkWest unitholders approved a strategic combination with MPLX. MarkWest and MPLX said 80% of units voted at the special meeting were in favor of the merger.The transaction, expected to close Dec. 4, means MarkWest, the second-largest processor of natural gas in the U.S. and largest processor and fractionator in the Marcellus and Utica shale plays, will become a wholly owned subsidiary of MPLX.
The emergence of the U.S. as a major producer and exporter of low-cost natural gas will force the global market to adjust its traditional business model, Charif Souki, Cheniere Energy Inc.’s chairman, CEO and president, told the Houston Producers’ Forum on Nov. 17.
Marathon Petroleum Corp. (NYSE: MPC) poured $400 million of sweetener on its deal for MarkWest Energy Partners LP (NYSE: MWE) on Nov. 10. But a former MarkWest executive remained staunchly opposed to a deal that he said pays “pennies on the dollar” for the company. Marathon agreed to raise the cash contribution of the merger between its MLP, MPLX LP (NYSE: MPLX) and MarkWest to $1.075 billion from $675 million. The deal would make MarkWest a wholly owned subsidiary of MPLX. Some critics were not appeased. John Fox, former CEO, chairman and director of MarkWest Energy GP LLC, which manages the MarkWest MLP, wasn’t placated by the new offer.
The former chairman of MarkWest Energy Partners LP’s (NYSE: MWE) management company wants to scuttle a multibillion dollar merger between MarkWest and Marathon Petroleum Corp. (NYSE: MPC) and its MLP, MPLX LP (NYSE: MPLX).John Fox, former CEO, chairman and director of MarkWest Energy GP LLC, which manages the MarkWest MLP, questioned why the MLP is selling itself for “pennies on the dollar.”In July, Marathon and MPLX said they would purchase MarkWest Energy Partners for a deal then worth $15.7 billion.
Neither the MLP structure nor the midstream sector itself are broken, a trio of finance experts told a packed house at Hart Energy’s inaugural Midstream Texas conference. Being stuck in a down cycle might make it appear that way, though. “I think some MLPs are broken but I don’t think the MLP space is broken,” said Peter Augustini, partner with Energy Spectrum Capital. “Some of the MLPs were wandering into the area where private equity was more appropriate.” The experts were responding to a question that challenged their relatively bullish outlooks for the sector, given upstream’s commodity price-induced doldrums. They emphasized that the MLP structure and the midstream energy sector were not one and the same, despite conditions that have brought the two together.
A reluctance to push forward with final investment decisions (FIDs) on LNG facilities during the commodity price downturn could result in a global gas shortage beginning in 2022, McKinsey Energy Insights forecasts in a new report, “Global Gas Outlook to 2030.” LNG demand growth will remain strong at 5% per year in the short term, McKinsey said, but be countered by surging supply from new liquefaction facilities coming online in Australia and the U.S. This will produce a continued loosening of the market, which could result in a pricing convergence for gas on a global scale that is a departure from the regionalized differences that developed between 2012 and 2014. That, however, could change over the long term.
The frost is on the pumpkin and the first chilly mornings of fall have kicked home furnaces on with a familiar “kuh-WUMPH.” At least many natural gas producers and transmission system operators hope that’s so as weather is the major factor impacting gas demand.
In a wide-ranging panel discussion, Sen. Heidi Heitkamp (D-North Dakota); Rep. Ted Poe (R-Texas); and Rep. Bill Johnson (R-Ohio) agreed that an all-or-nothing approach by industry won’t work. Heitkamp said there are “irrational” positions on both sides of energy issues.“I’m the 49th most liberal senator from the 50th most conservative state—I know about compromise,” Heitkamp said at the Washington, D.C., conference.Current energy issues “are no-brainers that would take five minutes to solve in a boardroom,” Heitkamp said, but added that government doesn’t work the same way corporations do. Congress has to hear and respond to multiple viewpoints. Unfortunately, energy issues now are falling into two, bitterly opposed camps and the energy industry will suffer if it doesn’t respond.“Energy opponents are in an irrational conflict with the oil and gas industry: They (energy) are the bad guys” in the view of environment activists, Heitkamp said. However, energy providers tend to want everything they seek and ignore their opponents. Thus, nothing gets done, she said.
During one unsettled stretch of business while he was chairman and CEO of The Williams Cos. Inc., Joe Williams observed, “Everything is for sale but my wife and my huntin’ dog—and I’ll talk to you about the dog.” “But at what price?” might be the question some Williams shareholders are asking after the firm announced a merger Sept. 28 with Energy Transfer Equity LP (ETE). Williams shares, as well as Energy Transfer units, fell sharply following the announcement. The agreed-to, $37.7 billion price was below a $53.1 billion offer ETE made in June that was rejected as “significantly undervalued” by Williams’ board at the time. However, the underlying value of the transaction remains close to the earlier bid, given the decline in the two firms’ stock market value in recent weeks.
The big question on everyone’s mind is when are prices going to turn around; but the real question could be when does demand return? The current downturn isn’t so much akin to supply racing ahead of demand as it is to supply racing so far ahead of demand that it lapped it. In many ways the old conventions aren’t applicable: drilling efficiency has gotten to the point where the U.S. Energy Information Administration (EIA) and industry analysts are no longer relying on rig counts to forecast production output.
In a deal mode that has become reliable money for E&Ps in 2015, Matador Resources Co. (MTDR) has agreed to sell its midstream assets to EnLink Midstream Partners LP (ENLK) for $143 million.
What Midstream Businesses Need To Know About EPA’s Proposed Methane Air Emissions Rules
Data collection and analytics, which have typically been utilized by upstream operators, are beginning to enter the midstream. Louis Fabbi, senior data scientist with SAS, emphasized the importance of incorporating analytics into midstream operations at the recent SAS Energy Analytics Forum in Houston.
Midstream Appears To Be ‘Bright Spot’ For Oil, Gas Hiring
Industry Groups Stand Against The EPA’s Proposed Emissions Rules
Reasons For Hope That Oil Prices Will Rise
Midstream Accelerates In M&A Race; E&Ps Stuck In Neutral
Control Capex And Catch The FLNG Wave, Report Urges
Study: Utica Holds 20x As Much Gas As Believed
Without Breaking Stride, Marathon Petroleum Buys Moneymaker MarkWest
Intellectual Capital: Why Leave Money On The Table?
Magnum Hunter To Sell Eureka Pipeline, Easing Liquidity Woes
Too Many North American Proposals And Not Enough South American Demand
Limber But Not Yet Liquid
Crude By Rail Helps Make Up West Coast Oil Shortfall
Report Outlines Canada’s Energy Challenges
FORT WORTH, Texas—After a pipeline rupture in 2010 spilled more than 26,000 barrels of oil from a creek flowing into the Kalamazoo River in Michigan, the National Transportation Safety Board (NTSB) recommended that the American Petroleum Institute (API), in coordination with the Pipeline and Hazardous Materials Safety Administration (PHMSA), industry leaders and the public, form a stakeholder group. The result: Recommended Practice (RP) 1173. Its main goal is to provide guidance to pipeline operators for developing and maintaining a pipeline safety management system.
AUSTIN, Texas ─ Keith Bainbridge, managing director of CS LNG, says he founded the company on the idea that a particular resource is in short supply in LNG markets these days: common sense. Thus the “CS.” And he served up some common sense at the recent CWC Thirteenth World LNG Series Americas Summit.“It’s not rocket science,” he said, “and that’s why I do it.”
Combined midstream operations will include the Marcellus, Utica, Eagle Ford, Haynesville, Barnett, Midcontinent and Niobrara. It’s anticipated to be one of the largest, high-dividend paying C-Corps in the energy sector.
Midstream Monitor May 8 2015
Phillips 66 To Push Midstream, Chemicals
Midstream Monitor May 1 2015
Kinder: Environmentalist Strategy Blocks Midstream
Midstream Monitor April 24 2015
Alaska Sen. Murkowski: Time To Lift Sanctions On US Oil Industry
Will The ‘Circular Economy’ Be Unbroken?
Hess Builds On Historic Bakken Position
Mexico Says ‘¡Hola!’ To Natural Gas Expansion Projects
Midstream Investing Picks Up Where E&P Leaves Off
EPA Regs Will Damage Industry, Oil, Gas Groups Warn
Midstream Leaders Taking Cautious Approach To Downturn
Cushing Storage Capacity Is Being Tested
Pioneer’s Share Of Midstream Asset Valued At $1 Billion
LNG Keeps Gulf Oil’s Big Wheels Rolling
INGAA Director: Pipeline Safety Takes Priority
Propane Is The Hook For Sunoco Logistics
‘This Ain’t Our First Rodeo’
Flow Canada! New Pipelines Bring Alberta Crude To Gulf Coast
Ethane Will 'Never Walk Alone’
114th Congress Starts With Keystone Fireworks
Analysts Predict Price-Induced Pain In 2015
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