Executive Summary: Rigs: The total US rig count increased by 1 from 597 to 598 W-o-W for the week of March 10. Flows: US interstate gas samples dropped 0.4% W-o-W for the week of March 24. Infrastructure: The Permian Basin will drive new NGL production growth in 2024, as East Daley highlighted in our recent 1Q24 NGL webinar. Purity Product: The Permian Waha gas price has declined substantially in the last month while Mont Belvieu ethane prices have remained relatively flat.
Rigs:
The total US rig count increased by 1 from 597 to 598 W-o-W for the week of March 10. The liquids-driven Permian, Anadarko, Eagle Ford and Powder River basins drove the changes. Within the Permian, the Delaware lost 3 rigs. The Anadarko, Eagle Ford and Powder River each added 1 rig W-o-W.
Big-name Permian operators such as Exxon, Occidental, Chevron, EOG Resources, Permian Resources, and Marathon Oil all contributed to rig changes in the Delaware. Operators added and subtracted rigs across the basin, on balance dropping 3 rigs W-o-W.
Flows:
US interstate gas samples dropped 0.4% W-o-W for the week of March 24. Gas-weighted basins continue to drive declines as producers like EQT in the Marcellus respond to sub-$2 prices. Additionally, negative Waha price caused by maintenance on the El Paso sytsem will restrict supply coming from the Permian. Several other Permian pipelines have announced maintenance events for the next two months, including Gulf Coast Express (GCX), likely creating more volatility at Waha.
EDA explores these dynamics in our Natural Gas Weekly. Producers in the Northeast and ArkLaTex are limiting production and delaying wells start. Additionally, we have seen gas volumes drop in the Powder River Basin on Wyoming Interstate Company (WIC) behind the Western Midstream G&P system, likely the result of scheduled maintenance as reported by WIC.
Infrastructure:
The Permian Basin will drive new NGL production growth in 2024, as East Daley highlighted in our recent 1Q24 NGL webinar. EDA expects NGL production to grow by 280 Mb/d from 2023 to ‘24 on average. Almost 200 Mb/d, or nearly 70% of that growth will occur in the Permian (see figure).
Enterprise Products (EPD) and Targa Resources (TRPG) have garnered the most attention recently in the Permian-NGL space, announcing new construction for gas gathering and processing plants (a combined 2.3 Bcf/d), NGL pipelines (combined 1.0 Mb/d), new fractionation trains (0.6 Mb/d), and new LPG export facilities (0.4 Mb/d).
However, we expect Energy Transfer (ET) to win the most growth volumes in 2024 given latent capacity on its Lone Star NGL pipeline system, while EPD and TRGP NGL pipes are largely constrained until their growth projects come online in early 2025 (see table).
Enterprise transported about 550 Mb/d in 4Q23, bumping up against nameplate capacity, and we believe Targa flowed at least 615 Mb/d on its Permian-to-Mont-Belvieu pipeline segment. That would mean the pipeline is already at capacity, given prior comments by management alluding to effective pipeline capacity of 650 Mb/d with the addition of pump stations.
Producers fueling NGL production growth behind these three midstream behemoths include EOG, Chevron (CVX), ConocoPhillips (COP) and ExxonMobil (XOM), to name a few.
Purity Product Spotlight:
The Permian Waha gas price has declined substantially in the last month while Mont Belvieu ethane prices have remained relatively flat. The impact is a higher frac spread (Mont Belvieu ethane - Waha) for the rest of 2024 based on current forward curves. Historically a higher frac spread has driven more ethane and NGL recovery at the plants as its more economical to sell the Btus as ethane than as gas at Waha. As a result, we have increased Permian ethane production in our latest Purity Product Forecast, now available to clients.
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