The Daley Note: March 6, 2023
EnLink Midstream (ENLC) has added G&P assets in central Oklahoma to manage supply growth in the Anadarko Basin. ENLC did not disclose the counterparty on in its 4Q22 earnings call, but East Daley has identified the seller as Tall Oak Midstream.
In September 2022, East Daley flagged a looming infrastructure constraint on ENLC’s Central Oklahoma (COK) system, as result of increased rig activity in the STACK that we allocate to the COK system. We highlighted the need for additional gas processing capacity after ENLC had previously relocated its Thunderbird and Battle Ridge facilities to the Midland Basin.
In its 4Q22 earnings call, EnLink said it acquired an additional 280 MMcf/d of processing capacity overlying its footprint in the Anadarko. ENLC later identified the assets in its 10-K as the Redcliff (220 MMcf/d) and Carmen (60 MMcf/d) gas processing plants in Woodward County, OK, plus associated gathering pipeline. According to our midstream database, the Redcliff and Carmen plants are owned by private Tall Oak Midstream.
ENLC did not disclose terms of the purchase, but East Daley estimates a $115 million price tag based on other 10-K disclosures. ENLC projects EBITDA of $19 million in 2023 on the acquired assets, or a 6x multiple based on our price estimate.
The acquisition allows EnLink to handle production growth on the COK system, as shown in our ENLC - COK system profile in Energy Data Studio. The profile includes historical natural gas volumes processed by the COK system based on self-reporting to regulators, historical receipts for the ENLC – COK system in pipeline samples, and East Daley’s own forecast of system gas volumes based on nearby rig activity. As shown, interstate samples widely used by analysts and market watchers are inadequate and sometimes misleading indicators for tracking the EnLink system.
In our Daley Note post in September, we projected ENLC - COK would reach its gas processing limit of 960 MMcf/d by July 2023. The Tall Oak purchase raises processing capacity for ENLC - COK to 1.24 Bcf/d. Currently, East Daley forecasts an average of 10 rigs on the COK system through 2024. We forecast the system will exit 2024 at a production rate of 1.07 Bcf/d, or an 11% CAGR from current levels. With the added processing capacity, East Daley does not foresee ENLC hitting capacity ceiling for the foreseeable future, creating plenty of headroom for STACK producers to grow supply and for EnLink to grow asset earnings. – James Taylor Tickers: ENLC.
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