The Daley Note: October 5, 2022
Texas state data shows higher volumes on Kinder Morgan’s (KMI) Crude and Condensate Pipeline (KMCC) amid climbing Eagle Ford producer activity thus far in 2022. Despite the rising flows, KMCC has continued reducing contracted rates, exposing future financial risk for the asset.
KMCC is a 266-mile pipeline serving producers in the Eagle Ford. The system receives crude from Dewitt, Karnes and Gonzales counties and delivers volumes to the Houston Ship Channel refining complex.
Activity in the Eagle Ford has continued to ramp through 2022, with rigs increasing from 65 to 92 rigs today (Oct. 4). Volumes on KMCC have followed this trend, increasing by 21% from January to June 2022.
Even with increasing volumes, KMCC faces contract risk in the coming years. KMCC filed a tariff in August to reduce the gathering rate paid by EOG Resources (EOG) from $1.33/bbl to $0.88 for volumes of less than 30 Mb/d.
In the longer term, KMCC has additional downside risk from legacy minimum volume commitments (MVC) that are well above the current market rate. East Daley forecasts EBDA falling from $109 million in 2022 to $34 million in 2025. Though a drastic decrease for the asset, KMCC is only a small part of KMI's vast portfolio, comprising 1.5% of forecasted EBDA in 2022. – Zack Van Everen Tickers: EOG, KMI.
Webinar: Dissecting U.S. Natural Gas Production
Join us at 12 p.m. ET on Wednesday, October 12 for a webinar discussion of U.S. natural gas supply and demand. In this 30-minute webinar, East Daley analysts will go behind the curtain and share our unique production methodology. Click here to register and for more information. For those interested in a deeper dive into natural gas market dynamics, we published an updated monthly Macro U.S. Supply & Demand Forecast Report and Dataset this past week (Sept. 26). Please contact Zack Van Everen to request a copy.
Speaking Event: LDC Gulf Coast Energy Forum
East Daley is participating in the 4th annual LDC Gulf Coast Energy Forum this coming week, Oct. 12-14 in New Orleans. Vice President of Analytics Rob Wilson will join a panel discussion titled, “State of the Gulf and Beyond: LNG Export Updates, Supply and Demand Fundamentals and the Effect on the World,” at 10:30 a.m. CT on Oct. 12 in New Orleans. Please click here for event registration and more information.
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