Upcoming maintenance work on the Wink-to-Webster and Midland-to-Echo III pipelines in June will disrupt normal operations out of the Permian Basin and ripple through regional crude oil prices. We expect shippers will reroute some supplies from the Permian, pressuring Midland prices lower. The work is also likely to cause earnings impairments for several midstream companies.
With 1.5 MMb/d of capacity, Wink-to-Webster and Midland-to-Echo III is a primary artery out of the Permian to the Houston market. Wink-to-Webster has operated at a high throughput since start-up in 4Q20, moving an average of ~800 Mb/d in 2023. Combined with Midland-to-Echo III, the system ran ~1.2 MMb/d on average in 2023, or nearly 20% of Permian demand (~6.1 MMb/d in 2023, according to East Daley’s Crude Hub Model. Enterprise Products (EPD) has an undivided joint interest in the system, bringing the system’s aggregate capacity to 1.5 MMb/d.
On its 1Q24 earnings call last Tuesday (April 30), EPD said it has notified shippers of the maintenance work scheduled to begin in June and last for 10 days. The work on the pipelines will force shippers to find alternative routes for ~1.2 MMb/d of Permian oil flows.
According to East Daley’s Crude Hub Model, pipes to the Gulf Coast have ~937 Mb/d of excess capacity split between Corpus Christi, Houston and Nederland, based on average flows in 2023. Of this total, ~360 Mb/d is capacity to Corpus Christi and Nederland, so the majority of oil will still flow to Houston on less-desirable pipes. For example, ONEOK’s (OKE) BridgeTex has ~360 Mb/d of excess capacity. However, due to its high ‘23 average blended rate ($2.04/bbl), the system is not used extensively.
In addition to these destinations, pipes to the Cushing hub in Oklahoma have spare capacity (~449 Mb/d) and could be a market of last resort. Barrels could flow north from West Texas to Cushing, then south towards the Gulf Coast. However, shippers would need to pay stacked rates well above the -$1.25/bbl spread currently.
The impact on shippers is unclear until they make actual nominations in mid-May. In response, producers could opt to empty their storage tanks in May to maximize returns on current inventory and make space to refill in June while the pipe are down. The Midland–MEH spread for June has dropped from -$0.40/bbl to below -$1.10/bbl, underscoring the urgency of the situation.
EDA’s Financial Blueprints indicate a limited financial impact for Plains All American (PAA), MPLX, Energy Transfer (ET) and Enterprise Products (EPD) from the maintenance event. We estimate the Wink-to-Webster shutdown will negatively affect PAA (16% stake) by ~$2MM, MPLX (15%) by ~$1MM, and ET (5%) by ~$0.5MM. EPD would lose ~$6MM from its ownership of Midland-to-Echo III during the maintenance period. – Gage Dwan Tickers: EPD, ET, MPLX, OKE, PAA.
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