Executive Summary: Rigs: The total rig count decreased by 2 for the August 25 week, down to 566 from 568. Flows: Constraints at the Waha hub persist as operators await the startup of Matterhorn. Infrastructure: ONEOK (OKE) is rebuilding a 210 Mb/d fractionator in Medford, OK that was damaged in a July 2022 explosion. Purity Product Spotlight: As an amuse-bouche for Bakken ethane, supply has ticked higher for the first six months of ’24 due to depressed AECO gas prices that have widened the frac spread (Mont Belvieu ethane minus AECO gas price).
Rigs: The total rig count decreased by 2 for the August 25 week, down to 566 from 568. Liquids-driven basins decreased by 7 rigs, moving the count from 463 to 456. The DJ, Eagle Ford, and Uinta basins each decreased by 1 rig whereas the Permian basin decreased by 4 rigs.
In the DJ Basin, operator GMT Exploration dropped 1 rig. In the Eagle Ford Basin, Kimmeridge Texas Gas, LLC droopped 1 rig. In Delaware, operators Mewbourne Oil and Permian Oilfield Partners, LLC each removed 1 rig. In the Midland, Occidental Petroleum and Browning Oil each dropped 1 rig.
Flows: Constraints at the Waha hub persist as operators await the startup of Matterhorn. The Permian Basin saw a slight decrease in flows due to ongoing scheduled maintenance at various points on the El Paso pipeline. The Guadalupe and North Mainline stations are expected to continue operating at reduced capacity, averaging 460 MMcf/d throughout September. Meanwhile, the ArkLaTex region remained flat on a weekly basis. East Daley estimates an average of 1.25 Bcf/d has been curtailed this year in the basin.
In the Anadarko Basin, flows on the NGPL and Northern Natural Gas pipelines have increased. The force majeure east of 302 is still in effect, limiting eastbound flows towards Louisiana until the end of September.
The Gulf of Mexico sample will be affected by the impact of Hurricane Francine, now a tropical storm moving through the Southeast. Operators like Chevron, Shell and ExxonMobil have announced shut-ins on their offshore production platforms. However, production levels might not be as heavily impacted as previous storms due to the precautionary evacuations.
*W-o-W change is for the two most recent weeks.
Infrastructure: ONEOK (OKE) is rebuilding a 210 Mb/d fractionator in Medford, OK that was damaged in a July 2022 explosion. East Daley thinks this will help OKE maximize the use of its pipelines and NGL assets that link the Conway, KS and Mont Belvieu hubs.
Conway mainly supplies propane, butane and natural gasoline to the Midwest, where demand remains stable, with slight fluctuations. Mont Belvieu, however, is key for NGL demand growth, driven by Gulf Coast petrochemicals and international exports.
OKE’s Arbuckle NGL pipelines transport mixed NGLs from Conway to Mont Belvieu, operating at 83% capacity over the last year. By contrast, OKE’s Sterling purity product pipeline is underutilized at just 36%. The new fractionator will improve OKE’s ability to separate ethane from propane, increasing the use of the Sterling system to supply the growing Mont Belvieu market. This, in turn, will create more capacity on Arbuckle for future supply growth.
Purity Product Spotlight: As an amuse-bouche for Bakken ethane, supply has ticked higher for the first six months of ’24 due to depressed AECO gas prices that have widened the frac spread (Mont Belvieu ethane minus AECO gas price). As discussed in the 3Q24 NGL webinar addendum, the T&F hurdle rate to move ethane from the Bakken to Gulf Coast demand markets is a lot lower than the bundled $0.30/gal T&F rate posted through FERC and disclosed by OKE. In the first six months of 2024, we have seen ethane climb by more than 30 Mb/d as the frac spread has increased above our estimated $0.07-$0.09/gal (refer to the figure below).
