DCP Midstream LP management reiterated its commitment to seizing the “tremendous opportunity” presented in the Denver-Julesburg (DJ) Basin of Colorado despite the regulatory uncertainty brought on by a ballot measure seeking to extend setback requirements for future oil and gas wells.

Colorado Rising, a coalition of environmental organizations, submitted the Initiative 97 ballot measure proposal earlier this month with 171,000 supporting voter signatures, surpassing the qualification for slightly under 100,000 signatures. Under Initiative 97, oil and gas wells would have to be 2,500 feet from homes, high occupancy structures (now 1,000 feet) and "vulnerable areas."

On a call last Wednesday (Aug. 8) to discuss second quarter earnings, DCP CEO Wouter van Kempen referred to the oil and gas industry in Colorado as “absolutely a cornerstone of our state’s economy.”

The company chief said there have been similar political efforts in the past, “and I think the voters of state of Colorado are pragmatic voters. They understand the positive impacts of our industry, and they’ve opposed types of these kind of extreme measures in prior elections.”

Earlier this month, DCP brought online its 200 MMcf/d Mewbourn 3 natural gas processing facility in the DJ, increasing the total processing capacity in the basin to more than 1 Bcf/d. The midstream operator has also started construction on the 300 MMcf/d O’Connor 2 gas processing plant, which is expected to be in service in the second quarter 2019, and permits have been filed for a 12th plant, named Bighorn. The company reported 15% gathering and processing (G&P) growth during the last year.

DCP also has a couple of projects aimed at boosting DJ natural gas liquids (NGL) takeaway capacity.

Beyond the Colorado portfolio, van Kempen said the company’s assets in other regions leave DCP well positioned for future growth. For example, some of the capacity tightness in areas like the Permian Basin means “that a place like the Eagle Ford is up 30% in volumes. Why? Because producers have moved rigs out of the Delaware Basin onto our acreage in the Eagle Ford,” he said.

The DJ also may see more activity as producers move away from the constrained Permian Delaware sub-basin. “There’s a lot to be wood to be chopped between here and the elections in November, as an industry and as a state,” van Kempen said.

That’s not to say DCP isn’t growing its assets in the Permian as well. The midstream operator has seen double-digit G&P volume growth across its footprint during the last year, and the newly expanded Sand Hills NGL pipeline has ramped up to 425,000 b/d, three months ahead of schedule.

Although Permian G&P volumes declined a bit during the second quarter because of unplanned maintenance, the trend appears to have shifted and “is now on a positive trajectory with volumes up 5% from the first quarter and expected to grow the remainder of the year,” van Kempen said.

Meanwhile, the CEO said its major producer customers have confirmed they have adequate gas takeaway from West Texas and southeastern New Mexico. “We have some processing capacity that is sitting open, and is not sitting in the most congested areas of the Delaware Basin.”

Given its asset location in the northern part of the Delaware, van Kempen said DCP’s volumes from southeastern New Mexico’s Delaware in the second half of 2018 should continue to grow. “Our pipelines will be full.”

For the second quarter, DCP reported net income to partners of $61 million (7 cents/share), down from $88 million (33 cents) in the second quarter 2017. Distributable cash flow (DCF) was $166 million, up from $119 million in 2Q2017.

The company updated its 2018 guidance to $345-390 million in forecasted net income, and to between $635 million and $670 million (with a $650 million midpoint) for DCF.