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Fresh Pavement on the Road to El Dorado

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The Daley Note: July 25, 2023

Previously in EOG on the Road to El Dorado, East Daley discussed EOG building a 41-mile, 36-inch pipeline to move gas from its Dorado development in Webb County, TX eastward. The 41-mile pipeline segment connected into Kinder Morgan (KMI) or Enterprise Products Partners (EPD) intrastate pipeline systems, giving EOG gas a route to the Agua Dulce Hub.  

In May, Pecan Pipeline Company, an EOG subsidiary, was granted an amendment to its original permit. Under the revised permit, EOG intends to construct 97 miles of pipeline that follows the already permitted path for the pipeline, and extend an additional 57 miles into Nueces Country, TX. The updated pipeline route allows EOG to bypass KMI and EPD systems and reach the Agua Dulce Hub. Referencing pipes of similar diameter, EDA estimates the pipeline to have 1.0-1.2 Bcf/d of takeaway capacity. Based on EDA Production Scenario Tools, if EOG maintains the two rigs that are currently active on the Dorado development, the system production will crest at over 750 MMcf/d in early 2026.  

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Despite these developments, in their 1Q23 earnings call EOG laid out their intentions to delay completion of wells drilled in Dorado until the natural gas price environment has improved. The gas contained in the Dorado development is not required to meet current market demand, and EOG maintains a long position on natural gas prices.  

When price increases, EOG is prepared to turn wells in line, continue drilling activity, and with the aid of 97 miles of new pipe, transport their molecules to gas markets along the Gulf Coast, including rising demand in Mexico and from LNG export. – Zach Krause Tickers; EPD


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