Denver-Julesburg Basin

The Denver-Julesburg Basin isn’t the Permian — no argument there. But like its much bigger brother in West Texas and southeastern New Mexico, the DJ Basin has been a hotbed of M&A in both the upstream and midstream sectors. Among DJ producers, Chevron, Civitas Resources and Occidental Petroleum (Oxy) are now the top dogs, with big hopes for the future there. And, as we’ll discuss in today’s RBN blog, a handful of midstreamers have taken on leading roles in crude oil and gas gathering (and processing) in Weld County, CO, the heart of the basin.

Thanks largely to the Denver-Julesburg (DJ) Basin, Colorado ranks fourth among the 50 states in crude oil production, topped only by Texas, New Mexico and North Dakota — and, if it were a state, the offshore Gulf of Mexico (GOM). It’s also noteworthy that more than 80% of Colorado’s oil production comes from one county — Weld, the heart of the DJ and an hour’s drive northeast of Denver — and that a lot of consolidation has been happening in the DJ’s upstream and midstream sectors. In today’s RBN blog, we’ll look at the DJ Basin and the increasing concentration among the producers and midstreamers active there.

Multibillion-dollar mergers and acquisitions have attracted a lot of attention the past couple of years. Chevron buys Noble. ConocoPhillips acquires Concho. Cabot merges with Cimarex. Pioneer adds Parsley and DoublePoint. While it’s understandable that these mega-deals grab the spotlight, they tend to overshadow the many smaller-but-still-substantial agreements being announced at a rapid pace over the same period. Many of these less-than-$4-billion deals involve crude-oil-focused producers expanding their holdings in basins where they were already active, and many — no surprise — are happening in the Permian, although acreage in the Denver-Julesburg and the Eagle Ford are in play as well. In today’s RBN blog, we look at a few of the more interesting small and midsize acquisitions announced recently.

The Denver-Julesburg Basin in northeastern Colorado and southeastern Wyoming has been producing crude oil for many decades now, but there were only a few crude gathering systems there until just the past three or four years, which were marked by a rapid ramp-up in production associated with the Shale Revolution. The development of these systems was spurred by producers’ desire to more efficiently and cost-effectively transport increasing volumes of crude from their new horizontal wells to new and expanded takeaway pipelines. The gathering systems have been built and added to over time by a combination of entities –– producers themselves, midstream affiliates of producers, and independent midstream companies, many of them backed by private equity. Today, we discuss highlights from our new Drill Down Report on D-J Basin crude oil gathering systems.

Transporting crude oil from the lease to refineries and export docks is like a long-distance relay race. The crude oil gathered from several wells is handed off to shuttle or takeaway pipelines, which then pass it on to regional crude hubs like Cushing, OK — from the hubs, crude is transferred to still other pipes. To get the relay going, the developers of crude gathering systems work closely with their takeaway pipeline counterparts to figure out the most efficient way to effect the first baton pass. Today, we continue our series on crude-related infrastructure in the Rockies’ Denver-Julesburg (D-J) Basin with a look at Outrigger Energy’s existing and planned gathering systems, and their connections to Tallgrass Energy’s still-expanding Pony Express takeaway pipeline.

Occidental Petroleum’s recent acquisition of Anadarko Petroleum made Oxy the #1 producer in the Denver-Julesburg (D-J) Basin and gave it a majority stake in Western Midstream Partners, which owns crude-gathering and other midstream assets in the D-J, the Permian and the Marcellus. While Western Midstream’s gathering focus had been on helping Anadarko meet its own midstream needs, Oxy sees the partnership taking on a broader role as a provider of gathering services to third parties as well. Toward that end, Oxy and Western Midstream a few days ago announced a series of agreements designed to allow Western Midstream to operate as an independent company. Today, we continue a series on crude-related infrastructure in the D-J with a look at Western Midstream’s gathering and related assets owned in part by the basin’s largest oil, natural gas and NGL producer.

Private equity is playing a critically important role in the build-out of crude oil gathering systems in the Denver-Julesburg (D-J) Basin, where rising production volumes — and the expectation of further growth, especially in and around Weld County, CO — are spurring a number of major projects. For proof, you need look no further than ARB Midstream, which, with backing from Ball Ventures’ BV Natural Resources, has developed the largest privately held crude transportation and storage network in the D-J through a combination of acquisitions and new construction. Producers have dedicated a quarter of a million acres to it. Today, we continue a series on crude-related infrastructure in the D-J with a look at ARB Midstream’s fast-expanding asset base there.

Crude oil gathering systems play an important role in a matter critical to producers, marketers and refiners alike: crude quality. Well-designed gathering systems can help deliver crude with the API gravity and other characteristics that refiners desire and are willing to pay a premium for. This has become a particularly big deal in the Denver-Julesburg Basin, where a big expansion of gathering capacity is under way, and where the market gives extra value to “Niobrara-spec” crude with an API of 42 degrees or lower. Today, we continue a series on existing and planned pipeline networks to move D-J-sourced crude from the lease to regional hubs and takeaway pipes with a look at Taproot Energy Partners’ system.

The doubling of crude oil production in the Denver-Julesburg Basin over the past 18 months spurred a rapid build-out of crude gathering systems and other infrastructure. Unlike the sprawling Permian Basin, with its numerous centers of drilling and production activity in parts of West Texas and southeastern New Mexico, the vast majority of the D-J Basin’s incremental crude output has come from Weld County, CO. Understandably, Weld County also is where most of the D-J’s crude gathering systems are located, and where most of the gathering system expansions are being planned and built. Today, we continue a series on existing and planned pipeline networks to move D-J crude from the lease to regional hubs and takeaway pipes.

Crude oil production in the Denver-Julesburg (D-J) Basin has nearly doubled since January 2016 — only the Permian has outpaced the D-J’s growth rate over the same period — and production there now averages about 640 Mb/d. The D-J has just about everything producers want, including an unusually intense concentration of hydrocarbons within four geologic layers, or “benches,” only a few thousand feet below the surface, low per-well drilling costs, and direct pipeline access to the crude hub in Cushing, OK. Production growth in the D-J has spurred a rapid build-out of crude gathering systems and other infrastructure, especially in Colorado’s Weld County, the epicenter of D-J activity, which is located a short drive northeast of Denver. Today, we begin a series on existing and planned pipeline networks to move D-J crude from the lease to regional hubs and takeaway pipes.