The Daley Note: May 5, 2023
Build it, and producers will fill it. That seems to be the mantra these days for natural gas infrastructure in the Permian Basin. The latest evidence comes from Energy Transfer (ET), which reported a strong initial performance for the company’s new 200 MMcf/d Grey Wolf gas processing plant in the Delaware sub-basin.
ET placed Grey Wolf into service in December 2022 and the plant is already at 88% utilization, according to February plant inlet data filed with Texas regulators.
East Daley has tracked a rapid supply response for other newly started Permian gas assets. For example, Whistler Pipeline filled before sponsors had finished extending the line in West Texas. The results support East Daley’s view that new Permian pipeline expansions planned later in 2023 will quickly fill.
ET will add another 200 MMcf/d of processing capacity with its Bear plant, set to come online in 2Q23. Given the performance of Grey Wolf and the existing tightness in Permian processing capacity, Bear could also fill up quickly and create upside to our existing volume forecasts for ET’s Delaware system.
The addition of these two plants will bring ET’s Delaware Basin processing capacity up to 2.25 Bcf/d. Data from East Daley’s Energy Data Studio shows our forecast for ET’s Delaware system, illustrating it has sufficient processing capacity into the future (see figure).
Currently we forecast an average of 23 rigs on the ET - Delaware system through 2024, and expect volumes to grow by 12% (188 MMcf/d) in 2023 (exit to exit). If Bear can repeat Grey Wolf’s rapid rise, ET’s G&P volumes may grow even more than expected. Those additional processing volumes would also translate to higher NGL volumes on ET’s NGL pipeline and fractionation assets. We estimate the plant could produce ~25 Mb/d of NGLs at capacity.
Using East Daley’s Financial Blueprint for ET, we can estimate the upside to EBITDA. Given percent-of-proceed (POP) contract exposure in the company’s Permian G&P system and low Waha gas prices, we expect FY23 Permian G&P EBITDA would increase by ~$25MM if Bear filled immediately. The higher NGL production would add an additional ~$20MM of EBITDA via its NGL segment assets. — Ajay Bakshani, CFA & James Taylor Tickers: ET.
1Q23 Earnings Previews Now Available in Energy Data Studio
East Daley Analytics has published 1Q23 Earnings Previews and Financial Blueprint Models for all 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 available for the following companies: AM, CEQP, DTM, ENB, ENLC, EPD, ET, ETRN, GEL, KMI, KNTK, MMP, MPLX, OKE, NS, PAA, PBA, SMLP, TRGP, TRP, WES and WMB.
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1Q23 Earnings Reviews are now available for AM, CEQP, DTM, EPD, ET, and TRP. Subscribers can access these reports on the Energy Data Studio platform. For more information about Earnings Reviews, please reach out.
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Review the Year Ahead in Dirty Little Secrets
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Dirty Little Secrets reviews the outlook for Midstream and commodity markets in 2023 and the years ahead. East Daley discusses the outlook for crude oil, natural gas and NGLs and the impacts to midstream assets in our 2023 Dirty Little Secrets annual market report. Click here for a copy of the 2023 Dirty Little Secrets report.
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