Low natural gas prices have taken a toll on rig counts in the Anadarko Basin and led to lower activity on EnLink Midstream’s (ENLC) Central Oklahoma (COK) system, one of the basin’s premier G&P systems.
Rig counts in the Anadarko Basin have declined by 40% in the last eight months, hovering just above 50 rigs currently vs ~70 rigs in June 2023. Activity on the COK system has tracked with the basin-wide decline.
Historical rig and operator data for the COK system are available in East Daley’s Energy Data Studio. ENLC – COK rig counts have fallen from 11 in June ‘23 to 6 rigs in February ’24, according to EDA’s rig allocation model, a 45% decline. Core operators Devon Energy (DVN), Citizen Energy, and Camino Natural Resources have all dropped rigs from the COK system in this period.
In the EnLink Financial Blueprint, EDA currently forecasts 7 rigs on ENLC – COK through the first half of 2025, increasing to 8 rigs through YE27. We tie the outlook for the Anadarko Basin and the COK system to the Macro Supply and Demand Forecast, which expects higher gas prices ahead when new LNG projects start. The COK system is one of ENLC’s largest assets, accounting for ~22% of total company EBITDA, according to the ENLC Blueprint.
After growing ~3% Q-o-Q since 2022, volumes reported by EnLink for the Oklahoma segment began to decrease in 3Q23. In the company’s 4Q23 earnings report this week, ENLC reported gathering and processing volumes were flat Q-o-Q for the Oklahoma segment.
East Daley currently projects volumes and activity on ENLC - COK to grow with the expected return of higher gas prices starting in 2025. However, if producers maintain 6 rigs on the COK system going forward, we project volumes would stay flat at current levels (see figure).
We estimate the COK system can return to growth mode with 7 rigs or more. Currently in the ENLC Blueprint, we forecast 2024 EBITDA of ~$303MM for the COK system; an average of 6 rigs would reduce earnings by 7%, or ~$28MM, in our asset model. - James Taylor Tickers: DVN, ENLC.
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