Executive Summary: Rigs: The total US rig count decreased by 6 rigs for the May 12 week, down to 562 from 568. Flows: The US interstate gas sample is flat W-o-W for the week of May 26. Infrastructure: Energy Transfer (ET) made a move to secure a slice of the Midland NGL pie, agreeing to purchase WTG Midstream Holdings for $3.25B from Stonepeak, the Davis Estate, and Diamondback Energy (FANG). Purity Product Spotlight: The weighted-average Mont Belvieu NGL barrel has remained relatively steady since 3Q23 and has averaged $0.66/bbl in 2Q24 (refer to figure below), despite a blow to propane prices early this year.
Rigs:
The total US rig count decreased by 6 rigs for the May 12 week, down to 562 from 568. Liquids-driven basins again drove the decline, down 8 rigs W-o-W to a total of 458. The Permian Basin lost 3 rigs, including 1 rig from the Delaware and 2 rigs from the Midland. The Bakken decreased by 4 rigs, down to 33 from 37, and the Eagle Ford rig count decreased by 2.
In the Permian, Delaware operator Battalion Oil removed 1 rig from its system. Midland operators Ring Energy and Buck Wheat Resources both removed 1 rig from their systems. In the Bakken, 4 total rigs were lost, as Chord Energy removed 2 rigs, Petro-Hunt removed 1, and Iron Oil removed 1 for a total of 33 rigs. In the Eagle Ford, EOG Resources, Inc. lost 2 rigs, decreasing the total rig count to 53 from 55.
Flows:
The US interstate gas sample is flat W-o-W for the week of May 26. In liquids-targeted basins, the gas sample is down slightly, led by a decline in the Eagle Ford residue sample. The 7.9% (~127 MMbcf/d) drop is more noise than signal, however, as intrastate optionality in the Eagle Ford likely means gas just swiched from interstate to intrastate pipelines.
The flow sample in gas-driven basins is up 1.2%, with a 2.5% increase in the Northeast as EQT’s production recovers following its curtailment due to low gas prices. The “Other” region gas sample appears to have decreased W-o-W, but this is likely a head-fake. The Gulf of Mexico, which comprises most of the Other, is impacted by the Destin Pipeline reporting zero volumes since May 20. That’s a reporting error – Destin’s website is down – more than a real decline in physical flows. Despite some noise in the data, the gas sample was flat W-o-W.
Infrastructure:
Energy Transfer (ET) made a move to secure a slice of the Midland NGL pie, agreeing to purchase WTG Midstream Holdings for $3.25B from Stonepeak, the Davis Estate, and Diamondback Energy (FANG).
EDA summarized the ET-WTG transaction in a First Take earlier this week for clients. The acquisition is a strategic play by ET to capture growth at the Mont Belvieu NGL market hub. Based on data from EDA’s Energy Data Studio, WTG processed about 1.25 Bcf/d of Midland Basin gas in 1Q24 (refer to the figure), which translates to about 175 Mb/d of NGL production.
The Lone Star and BANGL pipelines transport most of the NGL production from WTG. This creates a compelling integration story given ET’s 100% ownership in Lone Star and 20% interest in BANGL (see figure below of Plant to Pipe connections).
As East Daley discussed in this year’s Dirty Little Secrets, the environment is ripe for midstream M&A. Bigger midstream players are actively seeking to consolidate the NGL value chain, which starts at the wellhead. Recent deals include Kinetik’s (KNTK) purchase of Durango Midstream and Phillips 66’s (PSX) planned acquisition of Pinnacle Midstream. We expect the trend to continue.
Energy Data Studio profiles all leading G&P systems in the Permian Basin, including private and producer-owned assets that could be the next acquisition targets. Large integrated midstream players continue to pursue deals to realize full value-chain economics for NGLs, including exposure to supply growth (Permian) and demand (export docks).
Purity Product Spotlight:
The weighted-average Mont Belvieu NGL barrel has remained relatively steady since 3Q23 and has averaged $0.66/bbl in 2Q24 (refer to figure below), despite a blow to propane prices early this year. In the company’s recent earnings call, Dorian noted that seven additional PDH facilities are scheduled to go into service in China by summer, providing structural pricing support for propane through the balance of ’24.