East Daley’s pipeline samples covering the ArkLaTex Basin have increased in February despite falling natural gas prices. The gains could reflect favorable hedging by producers, though lost demand from the Freeport LNG facility in Texas also could be skewing samples.
Through February 22, ArkLaTex samples this month are up ~460 MMcf/d over January flows and 325 MMcf/d over the December average. Pipeline samples in January were depressed by freeze-offs caused by Winter Storm Heather, but the apparent growth in the ArkLaTex sample since December is surprising given that gas prices have fallen below $2/MMBtu this month. The gains in the Haynesville sample since December also have bucked declines in other basins (see table).
DT Midstream’s (DTM) Blue Union system is leading the gains. The Blue Union sample is at an all-time high of 1.34 Bcf/d, up 150 MMcf/d over January volumes. Most of these volumes are feeding the Texas Eastern pipeline via LEAP at an interconnect near Gillis, LA. Energy Transfer’s (ET) Enable Haynesville gathering system is also posting strong growth. The Enable system is up 184 MMcf/d M-o-M to a record high 1.55 Bcf/d.
Haynesville pipeline samples in Louisiana and East Texas capture a relatively high share of regional production. In 2023, East Daley’s Haynesville Louisiana sample has correlated to ~74% of production reported by the Energy Information Administration (EIA), up from an average of 71% in 2022.
Lower demand from the Freeport LNG facility could be skewing Haynesville samples. Winter Storm Heather took a liquefaction train offline at Freeport in mid-January, and since then feedgas deliveries to the facility have fallen ~600 MMcf/d. Shippers could be redirecting gas that had previously flowed south out of Carthage on Texas intrastate pipes. However, we have not found a ‘smoking gun’ for this theory and are therefore inclined to trust the uptick in the sample.
Given historical rig trends and the growth in DTM – Blue Union and ET – Enable Haynesville samples, we believe Southwestern Energy (SWN) and Chesapeake Energy (CHK) are behind the recent gains. SWN drills almost exclusively on the Blue Union and Enable gathering systems, while CHK is active on Enable. We supect these large E&Ps are so well hedged that they can grow production through low prices, contributing to oversupply in the market. For example, over 80% of SWN’s 2024 natural gas production is hedged through fixed-price swaps at $3.54/MMBtu.
As the only pure gas play with a slew of new pipeline capacity, the Haynesville could be different. Recent projects include a 400 MMcf/d expansion of Enterprise Products’ (EPD) Acadian pipeline in April ’23 and 700 MMcf/d from DTM’s LEAP expansion. More than 4 Bcf/d of new LNG demand is also on the horizon when Plaquemines Phase 1 and Golden Pass LNG begin to ramp by the end of 2024.
East Daley’s January ArkLaTex Supply and Demand Forecast expects production to decline modestly from 16.8 Bcf/d in January down to 16.6 Bcf/d in July ’24. – Oren Pilant Tickers: DTM, EPD, ET, WMB.
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New Webinar: 2024 Outlook for Permian NGL Growth and Dock Exports
Join East Daley’s Natural Gas Liquids Team on Wednesday, February 28 for a new online webinar on the NGL market outlook. In our latest webinar, EDA will discuss the outlook for Permian supply growth and the impacts to NGL markets. We review the potential for LPG dock constraints and how long bottlenecks may last. We also look at the propane storage and price outlook in 2024. Join us February 28.
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