Here's One O&G Company That Could Soar In 2016 #energytransfer #businesstrends

By 28th December 2015 Industry News No Comments

Energy Transfer Equity’s $37.7 billion purchase of Williams Companies in September gave it control of pipelines and other midstream infrastructure that handle nearly a third of rising US natural gas demand. The deal also gave Energy Transfer Equity access to the biggest pipeline out of the Marcellus Shale, transforming billionaire Kelcy L. Warren’s company into a top 5 global energy company and one of the largest US midstream operators, after Kinder Morgan and Enterprise Products Partners.

Well-Positioned Heading Into 2016

This positions the company well heading into 2016, particularly given that natural gas production in the Marcellus is expected to remain strong, with new-well gas production per rig at the highest rate than any other gas play in the US. Further, analysts with global investment firm Jeffries said recently that while natural gas production will slow in the Marcellus/Utica next year, they will be the only two plays in the US to still grow in production Y/Y.

The June Regency Acquisition

Add to this Energy Transfer Partners’ (owned by Energy Transfer Equity) $18 billion acquisition of Regency Partners in June, which created the second-largest MLP in the US. ETP and Regency said then that they expected to capitalize on the “full breadth of the combined gathering and processing platforms in several prolific producing regions,” including the Eagle Ford Shale and Permian Basin. ETP highlighted that among the many benefits of this merger is the likelihood of further liquids volume growth for Lone Star, ETP and Regency’s NGL joint venture, and also the expected increase in natural gas volumes into ETP’s intrastate pipeline system.

Kelcy Warren, chairman and CEO of Energy Transfer Partners; Source: dallasnews.com, Mona Reeder/Staff Photographer

The opportunities presented from the ETP-Regency merger include not only the broader midstream footprint in Texas, but also the Marcellus and Utica shale plays, where Regency’s well-positioned operations and growth projects complement ETP’s Rover interstate gas pipeline (currently under construction), which will create over 3 Bcf/d of natural gas takeaway capacity from these plays. The presence of ETP and Regency in these shale plays will also be complemented by the significant activity of Sunoco Logistics Partners, L.P, another member of the Energy Transfer family, as it builds on its asset base in that region.

Ultimately, the acquisition of Williams Cos advanced the success of the ETP-Regency deal regarding a significantly expanded Marcellus/Utica footprint, ideally positioning Energy Transfer Equity to emerge as a major player in the Marcellus and Utica shales.

Credit: EIA’s December 2015 Drilling Productivity Report

The Combo With Williams Takes Energy Transfer “Into Every Basin”

Energy Transfer Equity Chairman Warren said in the September 30 statement announcing the deal, “The combination of Williams and ETE will create substantial value for both companies’ stakeholders that would not be realized otherwise.”

Jamie Welch, Energy Transfer’s CFO, said in the corresponding conference call, “The transactional combination will take us into every basin…It gives us every type of hydrocarbon and every type of midstream service offering that we can provide producers across the country.”

Credit: December 7-8 Presentation At Wells Fargo Meetings

The acquisition came as a record amount of natural gas flowed out of the Marcellus shale play in Pennsylvania, which is the largest and most prolific gas field in the US. The rise in production from the region has upended the US’s gas markets, as well as most of the US pipeline network that was previously designed to deliver gas from the Gulf Coast, Bloomberg reported.

Map of the Transco pipeline route; Credit: Williams Cos.

The Largest Gas Pipeline In The U.S.

Williams’ most important asset is Transco, the largest-volume interstate gas pipeline system in the US, which runs almost 1,800 miles between South Texas and New York City, thus linking the Marcellus region to populous US markets.

According to the company’s May investor presentation, Williams currently has contracts underwriting at least $2.5 billion to enlarge Transco. In a December presentation, the company said it plans to add expansions of the line into New York, Pennsylvania, New Jersey, and Virginia, through Constitution, Atlantic Sunrise, Appalachian Connector, and other projects. Transco’s lines already connect with some Energy Transfer businesses.

Credit: December 7-8 Presentation At Wells Fargo Meetings

Energy Transfer’s businesses (see slide below) will together have a larger network of pipelines than either Kinder Morgan or Enterprise Products Partners, at 104,000 miles. It is currently the largest natural gas transporter in the US (transporting 35% of all natural gas in the US), the third-biggest NGLs business, the third-largest MLP crude oil transporter, and has the second-largest LNG export facility planned (Lake Charles).

Credit: December 7-8 Presentation At Wells Fargo Meetings