After cutting capital investment 71% between 2014 and 2016, the 13 diversified U.S. exploration and production (E&P) companies examined in our Piranha! market study are planning to increase 2017 capital spending by 30%. While this seems like a lackluster rebound compared to the 47% boost announced by oil-focused E&Ps, the diversified group’s totals are skewed by the pull-back strategy of giant ConocoPhillips. Excluding ConocoPhillips, the 12 other companies are guiding to a 48% increase in 2017 investment—very similar to their oil-weighted peers. Today we continue our Piranha! series on upstream spending in the crude oil and natural gas sector, this time zeroing in on E&Ps with a rough balance of oil and gas assets.
The 21 oil-focused U.S. exploration and production companies examined in our Piranha! market study are planning an average 47% increase in their 2017 capital expenditures and expecting a 7% increase in production. The 47% boost in capex is huge, but due to draconian cuts in 2015 and 2016 this year’s total is still off 58% from 2014’s—an indication of the big hole the sector is still climbing out of. The Permian Basin continues to attract more capital—no surprise there—but capex in the Bakken is also on the rise after a few lean years. Today we continue our Piranha! series on upstream spending in the oil and natural gas sector, this time zeroing in on E&Ps that focus on crude.
In connection with 2016 earnings releases, U.S. exploration and production companies (E&Ps) have announced a surge in capital spending for 2017 after slashing investment by an average 70% from 2014-16. Our “Piranha” universe of 43 E&Ps is budgeting a 42% gain in organic capital outlays with a strong focus on the major U.S. resource plays. Despite crude prices languishing at an average of ~$47/bbl since January 2015, most of the upstream industry has weathered the crisis remarkably well, primarily through the “high-grading” of portfolios, impressive capital discipline, and an intense focus on operational efficiencies. Today we review the overall outlook for 2017 upstream capital spending and oil and natural gas production, and take an initial look at expectations for our group of companies.
Adapting to a new era of low crude oil and natural gas prices, U.S. exploration and production companies, have been reconfiguring their portfolios to focus on a small group of shale plays whose production economics can hold up even through tough times. Among the largest producers, no company is a better example of this trend than Anadarko Petroleum, which has sold over $12 billion in assets since the beginning of 2014—including properties that generated one-third of its 2016 production—to focus 80% of its capital investment on just three U.S. plays. Since year-end 2013, Anadarko has lowered its net debt by 16%, or $8 billion, and it exited 2016 with over $8 billion in liquidity. The company forecasts 15% compound annual production growth through 2021 at current prices, with the liquids weighting of output increasing from 44% in 2015 to 65% in 2021. Today we zero in on one of the 43 E&Ps whose new-era strategies are detailed in RBN’s new Piranha! market study.
U.S. oil and natural gas exploration and production companies, anticipating continuing low crude oil and natural gas prices, have been reshaping their portfolios to focus on a half-dozen top-notch resource plays whose production economics can hold up even through the roughest of patches. The biggest of these asset purchases and sales grab the headlines, but countless other, smaller deals are having profound effects too. Taken together, this piranha-like devouring of E&P assets in the Permian Basin, SCOOP/STACK and other key production areas is transforming who owns what in the plays that matter most, and positioning a select group of E&Ps for success. Today we review highlights from “Piranha!” —a just-released market study from RBN.
Evaluating midstream companies—their assets, their value, their prospects—is a complicated task. It’s not enough to rely on the public face that companies put forward; typically, they highlight their strengths and minimize their weaknesses. To gain a fuller understanding of midstreamers, you need to poke around, consider their individual assets, and assess the status and outlook of the various production areas they serve. Asset location matters for a lot of reasons, but mostly because midstream infrastructure serving a thriving basin—the Permian and Marcellus, for instance—will contribute a lot more to a company’s bottom line than assets serving an area in steep decline. Today we conclude a blog series that highlights key takeaways from East Daley Capital’s new, detailed assessment of more than 20 U.S. midstream companies.
When you examine the assets, contracts and other details of a midstream company using a fine-toothed comb, you can gain a fuller, more useful understanding of the firm’s value and growth prospects. With such a thorough analysis, one thing that becomes clear is that vertically integrated midstreamers—those with interconnected processing, pipeline, fractionation and storage assets—tend to do better than those whose facilities are scattered and disjointed. Why? Because by controlling the midstream value chain—all the way from wellhead to end-user—they flow product through multiple assets, filling capacity and gaining revenue each step along the way. Today we continue our review of highlights from a new East Daley Capital report that examines the inner workings of more than 20 U.S. midstream companies.
Accurately assessing the value of—and prospects for—a midstream energy company requires a deep, detailed analysis that considers the firm’s individual processing plants, pipelines, storage and other assets; asset location and the degree to which the assets complement each other; and the underlying contracts that generate revenue. Do less, and you may be getting a pig in a poke. It’s true, things are definitely looking up in the midstream sector, but that hardly makes every midstream company a winner. Today, we review highlights from a new East Daley Capital report that shines a harsh, bright light on the inner workings of more than 20 U.S. midstream companies.
The recently announced combination of DCP Midstream LLC and DCP Midstream Partners LP creates the nation’s largest natural gas processor and natural gas liquids producer at what may be a particularly opportune time. The newly formed DCP Midstream LP, operating as a master limited partnership, owns 61 gas processing plants with a combined capacity of 7.8 Bcf/d—enough to process more than 10% of current U.S. production—as well as 12 fractionation plants, 59,700 miles of gas gathering pipelines and 4,600 miles of NGL pipelines. Better yet, many of these assets serve some of the U.S.’s most prolific and promising production areas, including the Midland and Delaware basins within the Permian; the Denver-Julesburg (DJ); and the side-by-side SCOOP and STACK plays. In today’s blog, we review the combined entity’s assets and prospects for growth in what soon may be happier times for NGL processors.
Change continues to come fast and furious to midstream MLPs, with no master limited partnership facing a bigger shift than MPLX. MPLX LP, formed in 2012 by Marathon Petroleum Corp. (MPC), is no stranger to transformation. In 2015, MPLX acquired MarkWest Energy Partners for $14.7 billion, a move that in one fell swoop made the merged entity the fourth-largest MLP in the U.S. In October 2016, Marathon announced an aggressive “dropdown” strategy that will provide MPLX with additional assets that will generate about $1.4 billion in annual earnings by the end of 2019. MPLX also has a significant capital investment program that allocates $2.3-$2.8 billion to build out gathering and processing infrastructure and logistics and storage facilities in Appalachia and Texas. Today, we review our latest Spotlight analysis of one of the nation’s largest MLPs.
The past production profiles of the ten companies in RBN’s Gas-Weighted E&P peer group are dramatically different from the Oil-Weighted and Diversified U.S. E&Ps, boosting production by over 18% from 2014 to 2015, while the output of the other two peer groups was virtually flat. The group as a whole finally put on the brakes in early 2016 because of mounting debt and persistent low gas prices, cutting capital investment by 49% to dampen production growth to 4%. However, a small group of producers with solid balance sheets and strong hedging protection continue to target double-digit output growth. And with gas prices over $3.00/MMbtu, more growth is on the way. In today’s blog we discuss 2016 capital spending and production for our representative group of E&Ps whose operations are primarily focused on natural gas.
A group of 15 diversified exploration and production companies we have been tracking collectively has slashed capital expenditures by 70% since 2014, but so far the cumulative effect of these spending cuts has been only a 5% decline in production. Now, several of these E&Ps––especially those targeting the Permian Basin and the SCOOP/STACK plays––are planning capex increases and/or expecting production gains. Today we discuss 2016 capital spending and production for a representative group of E&Ps whose operations are roughly balanced between oil and natural gas.
The group of 21 liquids-focused exploration and production companies we have been tracking plans to cut capital expenditures by half in 2016, after a 42% decline in 2015. However, capex for this “oil-weighted” E&P peer group is apparently bottoming out—their mid-year guidance was only 2% lower than their original 2016 estimates. Even with deep cuts in capital spending, the group expects production to fall only 7% in 2016, and those estimates have been revised higher from the initial 2016 guidance. Also worth noting: Pure Permian Basin players, the most optimistic companies in the peer group, are cutting capital spending by only 19% and are expecting a 12% gain in production. And with Apache Corp.’s announcement earlier this week of a huge discovery in the Permian’s Southern Delaware Basin, the market is definitely making a turn. Today we discuss 2016 capex and production for a representative group of E&P companies whose proved reserves are more than 60% liquids.
Enable Midstream Partners stands at a crossroads. It has great assets –– natural gas gathering and processing operations in the Anadarko, Arkoma, and Ark-La-Tex basins; a crude oil gathering system in the Williston Basin; and interstate/intrastate gas pipelines that ship natural gas from its gathering regions to the Texas Panhandle and Illinois. The company also has an excellent position in gathering systems and processing plants in the prolific STACK and SCOOP plays in Oklahoma. But everything is not rosy. Earnings from STACK/SCOOP are being offset by production declines in its other areas of operation. On top of that, CenterPoint Energy, which owns 55.4% of Enable’s limited partnership units, is seeking to divest its shares, which would bring a new majority owner into the picture. In today’s blog we review our latest Spotlight analysis.
In their second quarter 2016 earnings announcements, North American exploration and production companies (E&Ps) announced relatively minor changes to the steep reductions in 2016 capital budgets they unveiled around the first of the year. Total 2016 “finding and development” spending for 46 leading U.S. producers was an estimated $41.0 billion, down 51% and 70% from investment in 2015 and 2014, respectively, and slightly lower than the $41.9 billion forecast for 2016 spending in year-end 2015 announcements. The second-quarter reports over the past few weeks also confirmed the initial guidance of a 4% production decline in 2016 after 7% and 6% increases in 2014 and 2015. However, as we discuss today, a look behind the headline numbers indicates that cuts in capital expenditures (capex) look to have bottomed out, and that the industry may be poised for a turnaround in drilling activity later this year into 2017.