Just the Two of Us - Midstreamers Joining Forces to Optimize Gathering and Processing

The crude-oil price crash of the past couple of weeks is forcing producers in every U.S. shale play to reassess their drilling-and-completion plans for the balance of 2020. Still, while the pace of activity in the Permian, the Bakken and other major plays may slow somewhat in the coming months if crude prices stay low, the vast majority of the new wells that are drilled will need to be connected to crude gathering systems — ideally ones that offer producers and shippers a high degree of destination optionality. Today, we continue our series on crude-related assets in western North Dakota with a look at another leading midstreamer’s gathering system, and its link to the Dakota Access Pipeline and a nearby refinery.

The Permian has been a leader in domestic oil and gas production for decades but the Shale Revolution made it a global superstar. In the past few years, thousands of miles of new crude oil, associated gas, and produced-water gathering systems have been installed in West Texas and southeastern New Mexico, as have dozens of new gas processing plants and a number of new takeaway pipelines for oil, gas, and NGLs. Lately, there has also been a lot of consolidation among Permian midstream companies, mostly with the aims of increasing scale, improving reliability, and directing more hydrocarbons through the combined companies’ gathering, processing, and takeaway assets. In today’s RBN blog, we continue our review of recent, major pipeline-company combinations in the Permian and the benefits participants expect to realize from them.

Amid all the energy-market excitement of the past few months — the soaring demand for LNG, the march to $100/bbl crude oil, sky-high propane prices, and the like — there also has been a continuing consolidation and repositioning in the U.S. midstream sector. While midstream M&A activity has been all over the map, literally and figuratively, it also has revealed discernible themes, chief among them a push to increase the scale and efficiency of gathering systems. Also evident is the desire to expand into growing production areas and, for some energy giants, to either buy out stakes held by joint venture partners or absorb midstream master limited partnerships they had spun off a few years ago. In today’s RBN blog, we discuss a variety of recent midstream deals and what they tell us about 2022’s energy market.