Executive Summary: Rigs: The total US rig count decreased by 2 during the week of February 23 to 555. Infrastructure: The Double H Pipeline’s conversion to NGL service could play havoc on volumes out of the Gurnsey hub and on downstream pipelines. Storage: East Daley expects a 450 Mbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending March 7.
Rigs:
The total US rig count decreased by 2 during the week of February 23 to 555. Liquids-driven basins decreased by 5 W-o-W to 463.
- Permian (-5):
- Midland (-3): Exxon Mobil, Moriah Operating, Highpeak Energy
- Delaware (-2): Mewbourne Oil, ConocoPhillips
- Bakken (-1): Continental Resources
- Anadarko (+1): Crawley Petroleum
- DJ (+1): North Peak Oil & Gas
Infrastructure:
The Double H Pipeline’s conversion to NGL service could play havoc on volumes out of the Gurnsey hub and on downstream pipelines. The Kinder Morgan (KMI) project poses a particular risk to assets in the Denver-Julesburg Basin, where local output is struggling.
Since 2019, the DJ Basin has experienced a rapid decline in drilling activity. As a result, utilization has crept lower on crude oil infrastructure, negatively affecting earnings for midstream operators. With production from legacy wells steadily declining, DJ-based pipelines increasingly depend on volumes from Guernsey to backfill the lower volumes. However, the Double H conversion poses a significant risk to those Guernsey barrels.
Producers and shippers also have limited options to move crude oil out of the DJ, exacerbating economic pressures on upstream operators and midstream providers. EDA’s DJ Crude Oil Supply & Demand Model forecasts egress pipe utilization to average 75% in 2025, declining to 72% in ’26.
Leading operators Civitas Resources (CIVI) and Occidental Petroleum (OXY) are also looking to leave the basin, another risk for supply. However, the exit also gives opportunity to upstart producers like Prairie Operating (PROP), which recently acquired Bayswater Exploration & Production.
On its latest earnings call, NGL Energy Partners (NGL) highlighted strategic initiatives to mitigate volume risk, including a long-term acreage dedication and additional contract with PROP. Management expressed confidence that these agreements, coupled with PROP’s recent Bayswater acquisition, will lift future volumes. NGL anticipates upside to its target of an additional 100 Mb/d throughput on Grand Mesa Pipeline, which is currently operating at ~44% utilization.
EDA’s Financial Blueprint for Plains All American (PAA), a significant owner in the Saddlehorn and White Cliffs pipelines, forecasts steady FY25 and FY26 earnings due to minimum volume commitments (MVCs) on Saddlehorn of ~$153MM and ~$150MM. However, we model earnings erosion on White Cliffs during the same period, reflecting the impact of declining DJ crude volumes.
The DJ Basin has significant headwinds, but strategic developments like PROP’s acquisition and NGL’s proactive contractual commitments offer potential stabilization. Midstream operators and investors will need to closely monitor these evolving dynamics to strategically navigate market challenges and capitalize on emerging opportunities.
Storage:
East Daley expects a 450 Mbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending March 7. We expect total US stocks, including the SPR, will close at 832 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, increased 1.43% W-o-W across all liquids-focused basins. Samples increased 3.4% in the Permian, 3% in the Williston Basin and decreased 8% in the Eagle Ford. The Rockies and the Gulf of Mexico have a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
We expect US crude production to be 13.5 MMb/d. According to US bill of lading data, US crude imports increased to 6.5 MMb/d. More than 60% of the supply originated from Canadian pipelines and vessels into the US, with the remainder largely coming from vessels carrying crude from Mexico, Brazil and Argentina.
As of March 7, there was ~650 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude input into refineries to increase, coming in at 16.3 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast increased W-o-W. There were 21 vessels loaded for the week ending March 7 and 19 the prior week. EDA expects US exports to be 3.1 MMb/d.
The SPR awarded contracts for 6.0 MMbbl to be delivered To Choctaw February – May and 2.475 to be delivered to Bryan Mount Jan – March 2025. The SPR has 395 MMbbl in storage as of March 7, 2025.
Regulatory and Tariffs:
Presented by ARBO
Tariffs:
Western Refining Conan Gathering, LLC An additional origin point was added to the chart containing the rates and routes for acreage dedication volumes. No new rates are being added and no changes are being made to the existing rates contained in the acreage dedication chart. Two surcharges were also canceled. FERC No 2.56.0 IS25-233 (filed February 21, 2025) Effective February 24, 2025.
Arrowhead Eagle Ford Pipeline, LLC A new destination was established to reflect the addition of Sunoco/NuStar’S South Texas System in San Patricio County, TX with the agreement of at least one non-affiliated shipper. A new pump-over charge was also added for deliveries to that location. FERC No 2.10.0 IS25-235 (filed February 21, 2025) Effective March 1, 2025.
The above information is provided by ARBO’s Oil Pipeline Tariff Monitor. For more information on regulatory proceedings or tariff rates, please contact please contact Corey Brill via email at corey@goarbo.com or phone at 202-505-5296. https://www.goarbo.com/
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