The Daley Note: November 08, 2022
Summit Midstream (SMLP) is expanding its reach in the Denver-Julesburg Basin, announcing two deals to acquire the Outrigger II and Sterling G&P assets for $305 million in cash. We are tracking 1 rig between the two DJ systems in our Midstream Activity Tracker, and we model modest but steady production growth ahead, led by Outrigger II.
SMLP announced the deals with subsidiaries of Outrigger Energy II and Sterling Investment Holdings on Oct. 17. The assets include natural gas G&P systems, a crude oil gathering system, and a freshwater delivery system in Weld, Morgan, and Logan counties, CO and Cheyenne County, NE. The G&P assets are near SMLP's own Hereford G&P system in Weld County, and SMLP plans to interconnect the three systems to expand its coverage further south in the DJ. The transaction will triple SMLP’s gas processing to a combined capacity of 185 MMcf/d from five gas plants: Jackson Lake, Yenter, Centennial, Makena, and Hereford.
The latest acquisitions signal that SMLP plans to prioritize the DJ Basin as the midstream company realigns its diverse portfolio. SMLP this year has sold off its Bison gathering system in North Dakota and its Lane G&P system in the Delaware Basin.
Currently, East Daley is tracking 1 rig on the Outrigger II - DJ system in our Midstream Activity Tracker. Drilling activity reemerged in December 2021, and rig counts were as high as 2 rigs in March-April 2022, likely in response to higher commodity prices.
In our asset-level Blueprint Financial Models, we currently forecast gas volumes processed by Outrigger II to average 42 MMcf/d in 2022 and 57 MMcf/d in 2023. We are not tracking any rigs currently on Sterling; we model system volumes to average 20 MMcf/d in 2022 and 24 MMcf/d in 2023 (see figure).
The acquisitions will enable Summit to reach more producers in the DJ and improve its midstream services. SMLP cited 75 new wells planned by Outrigger II and Sterling customers in 2023.
The latest activity follow a general recovery in the DJ, where basin rigs have increased to around 18 compared to a count of 11 rigs a year ago. Midstream operators like Western Midstream (WES) and private systems like Cureton and Rimrock all have seen increased rig activity, according to our Midstream Activity Tracker. While we don’t anticipate additional rigs in our forecast, the recent activity should keep supply growing on SMLP’s new assets. – Maria Paz Urdaneta Tickers: SMLP, WES.
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Is Midstream on the cusp of another infrastructure wave? East Daley will explore the potential in our annual Dirty Little Secrets market report in early December. Click here to receive updates on the 2023 Dirty Little Secrets report.
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East Daley, RBN Spotlight Targa in New Webinar
East Daley teamed up with RBN Energy on Monday (Nov. 7) to discuss the new Spotlight Report on Targa Resources (TRGP). Rob Wilson, East Daley VP Capital Markets, joined RBN CEO David Braziel in a Spotlight Live Session webinar to review the outlook for Targa and the key takeaways from the Spotlight Report.
Join East Daley for a Spotlight Happy Hour
Join East Daley in Houston at our Spotlight Happy Hour on Nov. 9 as we discuss the new Targa Resources Spotlight Report and meet the teams from RBN Energy and East Daley. The event follows the Targa Resources Spotlight Report and the new Spotlight Live Session webinar. You will have the opportunity to ask us questions about the Spotlight Report and Live Session, plus network with some of the energy industry’s best and brightest. Learn more on East Daley's Events page.
3Q22 Earnings Previews Now Available
East Daley has published a complete group of 3Q22 Earnings Previews and Blueprint Financial Models for midstream companies within our coverage. Quarterly Earnings Previews and Blueprints are now available for Antero Midstream (AM), Crestwood Equity (CEQP), Enbridge (ENB), EnLink Midstream (ENLC), Enterprise Products (EPD), Energy Transfer (ET), Equitrans Midstream (ETRN), Kinder Morgan (KMI), Kinetik Holdings (KNTK), Magellan Midstream (MMP), MPLX (MPLX), ONEOK (OKE), Plains All American (PAA), Summit Midstream (SMLP), Targa Resources (TRGP), TC Pipelines (TRP), Western Midstream (WES) and Williams (WMB).
Our Earnings Previews include quarterly earnings forecasts compared to Street consensus, a detailed list of the top assets that will impact the quarter, analysis of near- and long-term risks to future earnings, along with forecasts for Adj. EBITDA by segments. Please log in to access these reports.
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