The Daley Note: April 14, 2023
Enterprise Products (EPD) held its annual investor day at the end of March. While the event was short on new project updates, the company did provide a detailed update to its outlook for crude oil, natural gas and NGL production across the US and Permian Basin.
The latest deck shows EPD has pulled back on its expectations for supply growth across most commodities. Total US production for dry gas is 7% lower, wet gas is 5% lower, and crude oil is 2% lower vs EPD’s prior forecast. The NGL outlook is up slightly (+1%) through the forecast. Management attributed the deviation to lower commodity prices over the last six months.
EPD’s short- to medium-term gas forecast mainly aligns with East Daley’s outlook in the latest Macro Supply and Demand Forecast, published in mid-March. However, we start to deviate by 2026 in our “Balanced” dry gas forecast, which averages ~9% more than EPD’s latest projections. East Daley maintains both a “Balanced” and “Unbalanced” gas market outlook to better identify trends and anomalies.
The divergence from our Balanced view is likely due to the large amount of LNG export capacity we expect to enter service later this decade. EPD’s dry gas forecast seems to align with LNG projects that have already reached a final investment decision (FID) and are currently under construction (~6.6 Bcf/d). East Daley also includes an incremental 10 Bcf/d of capacity from projects we expect to eventually make FID, based on our LNG tracker spreadsheet that monitors sale and purchase agreements (SPAs) by counterparty.
On the oil side, the decline in total US production comes from EPD’s outlook for the Permian Basin. EPD lowered its Permian growth forecast by ~5%, to 7.7 MMb/d by the start of 2030. East Daley’s latest Permian outlook in our Crude Hub Model is significantly lower, sitting at ~6.6 MMb/d by 2030. We think expectations on rig activity is the primary driver. We correlate active rigs in the Permian with the shape of the WTI forward curve, which is backwardated by ~$21/bbl and results in declining rigs in the later years of our forecast. – AJ O’Donnell Tickers: EPD.
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Join East Daley at the Southeast LDC Forum
East Daley Analytics will be participating at the LDC Gas Forums Southeast in Savannah, GA on April 12-14. Rob Wilson, VP of Product, will be speaking on April 12 to cover East Daley’s outlook on the natural gas market and fundamentals. Learn more about the LDC Forum.
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