After Covid-19 whipsawed the global economy over the past two years, Enterprise Products Partners LP (EPD) expects 2022 to bring a continuation of the global economic recovery and growth in crude oil, natural gas and natural gas liquids (NGL) production in the United States, driven primarily by the Permian Basin and Haynesville Shale.
“We believe both will provide Enterprise a solid economic foundation,” CEO Jim Teague said Tuesday during the fourth quarter conference call.
EPD’s natural gas processing and NGL businesses recently gained entry into the Midland sub-basin of the Permian Basin with the announced acquisition of Navitas Midstream Partners LLC.
Chief Commercial Officer Brent Secrest said there is a need for more gas takeaway out of the Permian. Sharing the microphone with Teague, the executive said a lot of the larger public exploration and production (E&P) companies are “fairly well set” in terms of gas takeaway capacity. In the past, it’s been the private E&Ps that have been the last to contract capacity.
“Ultimately, somebody is going to need to step up – or a collection of people are going to need to step up,” Secrest said. “Every month that goes by without a gas pipeline being announced, it’s just going to add to the problem.”
EPD posted a record 14.5 billion Btu/d in natural gas transportation volumes during the final three months of 2021. It also hit new peaks in ethane marine terminal exports, propylene production and refined product and petrochemical transportation volumes.
Widening natural gas forward basis prices in the Permian reflect the tightening gas pipeline conditions, NGI price data showed, with Waha seen falling more than $1.00 below the Henry Hub for September-November.
EPD has been in discussions with its customers about the potential for a gas pipeline project in the Permian. “Right now, we haven’t been able to get anything done on that side,” Secrest said.
As for crude oil, Senior Vice President (SVP) Tony Chovanec, who heads Fundamentals and Supply Appraisal, said public producers remain “very committed” to discipline. However, integrated majors like ExxonMobil and Chevron Corp. have indicated the Permian “is their hot basin” and both are “going to increase activity there for 2022 and beyond.”
Chovanec also noted that there is acreage outside the top acreage, aka Tier 1, which is changing hands in the basin. Private equity firms and private E&Ps are picking up this acreage. “We see rig counts, completions continuing to be added. And it’s very profitable.”
Haynesville Systems Starting To Fill
In the Haynesville, EPD is seeing growth, particularly in the Cotton Valley, a tight gas play that is within the expansive Haynesville/Bossier formation.
“As far as lean gas, our systems are starting to fill,” said EPD SVP Natalie Gayden, Natural Gas. “Our vision is that we're going to have to probably go through some expansions as far as treating goes. So all good things that we're seeing.”
EPD has a full year of operations ahead for the Gillis Lateral and Acadian Haynesville pipeline expansions, which were placed into service in December. The assets fetched a combined $7 million year/year increase in gross operating margin for 4Q2021, primarily because of higher capacity reservation fees and higher transportation volumes, which increased by an aggregate 493 billion Btu/d. The projects serve liquefied natural gas (LNG) export facilities in Louisiana.
In discussing the current energy supply disruptions and geopolitical tensions in Europe, Teague said their effect on the global economy may be short term. However, they may lead to “greater long-term international demand for U.S. crude oil, natural gas and NGLs as a source of reliable supply and to mitigate higher global prices, especially for LNG.”
EPD reported net income of about $1.0 billion (47 cents/share) in 4Q2021 from $337.3 million (15 cents) in 4Q2020. Full-year net earnings were $4.6 billion ($2.10), compared with $3.8 billion ($1.71) in 2020.
Total capital investments for 2021 were $2.2 billion. For 2022, EPD expects spending to be around $1.5 billion.
