Executive Summary: Rigs: The total rig count decreased by 1 for the October 27 week, down to 559 from 560. Infrastructure: ONEOK (OKE) has closed on its $2.6B acquisition of Medallion Midstream, marking the company’s expansion into Permian crude oil gathering. Storage: East Daley expects an 865 Mbbl injection in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending November 8.
Rigs:
The total rig count decreased by 1 for the October 27 week, down to 559 from 560. Liquids-driven basins declined by 4 rigs W-o-W.
Infrastructure:
ONEOK (OKE) has closed on its $2.6B acquisition of Medallion Midstream, marking the company’s expansion into Permian crude oil gathering. Strategically, the move makes sense and follows a strategy East Daley is seeing with other G&P and NGL asset deals: move closer to the wellhead to secure supply for downstream pipes and marketing.
OKE completed the $2.6B purchase from Global Infrastructure Partners on October 31. Medallion’s assets include more than 1,200 miles of gathering line with ~1.3 MMb/d of capacity, plus 1.5 MMbbl of crude storage in the Permian.
Recent crude acquisitions have generally flown under the radar, yet the Medallion Midstream deal continues a trend: Plains All American (PAA) and Oryx merged their Permian crude gathering assets in 2021, Energy Transfer (ET) acquired crude gatherer Lotus Midstream in 2023, and ET recently merged its Permian crude gathering assets (including systems acquired via Lotus) with Sunoco LP’s (SUN) NuStar Permian gathering system.
In our Dirty Little Secrets annual report, EDA highlighted NS and PAA as potential targets specifically for their Permian crude gathering assets, and the opportunity to leverage volumes to feed downstream pipelines, storage tanks, export terminals and marketing operations. The playbook is the same for OKE-Medallion.
Data from the Texas Railroad Commission indicates Medallion gathered ~850 Mb/d in May 2024 (see figure). Only 4 Mb/d is currently delivered into existing OKE systems, providing a clear upside opportunity for pipes like BridgeTex and Longhorn.
Storage:
East Daley expects an 865 Mbbl injection in commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending November 8. We expect total US stocks, including the SPR, will close at 821 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, decreased 1.0% W-o-W across all liquids-focused basins. Samples increased 8% in the Eagle Ford and .25% Rockies. Hurricane Rafael caused some production to be shut in the Gulf of Mexico resulting in a 23% decrease in gas samples. The Gulf of Mexico has 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 remain flat at 13.5 MMb/d. According to US bill of lading data, US crude imports increased by 360 Mb/d W-o-W to 6.6 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, Venezuela and Brazil.
As of November 8, there was ~294 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude inputs into refineries to increase by ~466 Mb/d W-o-W, coming in at 16.8 MMb/d.
Vessel traffic monitored by EDA along the Gulf Coast decreased W-o-W. There were 22 vessels loaded for the week ending November 8 and 25 the prior week. EDA expects US exports to be 2.9 MMb/d.
The SPR awarded contracts for 4.85 MMbbl to be delivered in October 2024. The SPR has 387 MMbbl in storage as of November 1, 2024.
Regulatory and Tariffs:
Presented by ARBO
Tariffs:
Centurion Pipeline L.P. The incentive rate from Cushing, OK to Childress Injection, TX was increased with agreement of all shippers. FERC No 45.27.0 IS25-77 (filed Oct 31, 2024) Effective October 31, 2024.
Tallgrass Pony Express Pipeline LLC. Certain refinery open season rates were decreased in accordance with the shipper contracts. The expiring Carpenter Open Season was replaced with the new open season rates. The joint contract tariff rates from the PRG terminal in Platte Cunty were reduced along with a reduction in the loss allowance. FERC No 11.9.0 IS25-74 (filed Oct 31, 2024) Effective December 1, 2024.
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/