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A Neglected Trophy in the Delaware

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The Daley Note: April 20, 2023

A modest oil pipeline could capture upside from development in the hottest US oil play.

Trophy Pipeline is an 8-mile crude oil gathering line in Lea County, NM that recently added 3 miles into Winkler County, TX. Owned and operated by Ameredev, the asset in the northern Delaware Basin saw average throughput of 16.5 Mb/d in 2022, according to pipeline filings with the Federal Energy Regulatory Commission (FERC).

With capacity of 50 Mb/d, Trophy has room to spare and enviable connections with the Plains All American (PAA) and Sunoco (SUN) pipeline systems, allowing its shippers to access destinations like Cushing and US Gulf Coast export docks from Corpus Christi to the greater Houston area (see figure).

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Both Lea and Winkler counties have a substantial number of new leases permitted to be drilled relative to the number of active and producing leases. Data from Texas and New Mexico regulators indicate Winkler County, TX has 386 drilling permits and Lea County, NM has 2,664 permits, which would grow the active well count by 50% and 23%, respectively.

With WTI prices near $80/bbl, drilling in the Permian is holding strong. The basin rig count totaled 356 rigs in mid-April, according to East Daley’s latest Midstream Activity Tracker, up 22 rigs Y-o-Y. Moreover, the Delaware sub-basin has been busier than the Midland. East Daley’s latest outlook in our March Production Scenario Tools expects total oil production across the Delaware Basin to grow 18% in 2023 (exit to exit). Our forecast is based on an average rig count of ~185 rigs through 2023 and ~3,200 wells turned in line.

East Daley covers crude oil pipelines like Trophy in the Crude Hub Model and in the company Financial Blueprints, available on the Energy Data Studio platform. At 33% utilization, Trophy Pipeline may be in a great position to realize upside from the Delaware’s projected growth, as are the connecting Plains and Sunoco pipeline systems. – Kristine Oleszek Tickers: PAA, SUN.


1Q23 Earnings Previews Now Available in Energy Data Studio

East Daley Analytics has published 1Q23 Earnings Previews and Financial Blueprint Models for midstream companies in our coverage. Our industry-leading Blueprints provide historical and forecasted volumes and financial information for 1,300+ midstream infrastructure assets by individual company.

1Q23 Earnings Previews and updated Financial Blueprints models are now available for the following companies: AM, CEQP, DTM, ENB, ENLC, EPD, ET, ETRN, GEL, KMI, KNTK, MMP, MPLX, OKE, NS, PAA, SMLP, TRGP and WES.

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