Despite roughly halving its guidance for expansion capital expenditures (capex) in 2020, Enable Midstream Partners LP is moving forward with a 100,000 Dth/d expansion of its system that would ease some of the existing bottlenecks in the Anadarko and Arkoma basins.
Enable signed a five-year precedent agreement last month for the $30 million MASS (Merge, Arkoma, SCOOP and STACK) transportation project, which would “address current natural gas takeaway limitations by connecting production in the Anadarko and Arkoma basins to delivery points with access to emerging Gulf Coast markets and the growing demand markets in the Southeast.”
The project is targeted for in-service in the second half of 2021, pending regulatory approval.
The MASS project comes as the midstream company contracted, or extended, transportation capacity by more than 575,000 Dth/d during the third quarter. This included some nine-year contract terms with CenterPoint Energy Resources Corp. for the majority of the renewed capacity on Enable Gas Transmission (EGT) that will go into effect on April 1.
Activity in the SCOOP (South Central Oklahoma Oil Province) and STACK (Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties) continues to drive volumes on Enable’s system, and the company expects natural gas gathered volumes to increase in the fourth quarter after a strong September. Volumes in September were up 4% from the 3Q average as a result of a large number of new wells coming online, management said.
Natural gas gathered volumes were 4.47 trillion Btu/d in 3Q2019, a decrease of 3% compared to the 4.61 trillion Btu/d reported in 3Q2018. The decline was due mostly to lower gathered volumes in the Arkoma and Anadarko basins, according to management.
Natural gas processed volumes were relatively flat year/year at 2.49 trillion Btu/d during the quarter, while crude oil and condensate gathered volumes were 132,990 bbl/d for third quarter 2019, an increase of 101,120 bbl/d compared to 31.87 MBbl/d for 3Q2018. The increase in crude oil and condensate volumes was primarily due to the acquisition of Enable Oklahoma Crude Services, LLC’s crude oil and condensate gathering system in the Anadarko Basin. In addition, crude oil gathered volumes in the Williston Basin rose by 30%, hitting a new record during the quarter. Meanwhile, September crude oil and condensate gathered volumes in September rose 12% above the 3Q average, management said.
Enable also reported higher firm contracted capacity on its interstate and intrastate systems.
As of Oct. 28, there were 31 rigs across Enable’s footprint that were drilling wells expected to be connected to the company’s gathering system. The company’s market share in the Anadarko remained “solid” with 44% (22 rigs) in the basin, while six were in the Ark-La-Tex Basin and three were in the Williston Basin, according to management. It expects to gather crude oil and condensate from wells drilled by 88% of the active rigs on Enable’s footprint in the SCOOP.
“While the Anadarko Basin faces some challenging sentiment, we are partnered with the best operators in the core areas of the SCOOP and STACK that continue to allocate significant capital to deploy and deliver favorable results,” Enable CEO Rod Sailor said Wednesday on a call to discuss third quarter earnings.
As part of its ongoing efforts to rationalize its assets, Enable also agreed to sell EGT’s undivided 1/12th ownership interest in the Bistineau natural gas storage facility in Louisiana. The $19 million deal is expected to close in the second quarter of 2020.
“We are always looking at assets that don’t make sense to own. When under cost pressures, we’re even more aggressive when we think about rationalization of assets,” Sailor said.
Looking ahead to 2020, Enable expects expansion capex to decline 47% year/year to no more than $240 million, with the majority of that budget targeting the gathering and processing segment. The midstream company is projecting full-year net income between $385-445 million, and distributable cash flow between $720 and $800 million.
Also next year, Enable expects natural gas gathered volumes to range from 4.5-5.1 trillion Btu/d, driven largely by the Anadarko and Ark-La-Tex basins. Natural gas processed volumes are expected to range from 2.2-2.8 trillion Btu/d, mostly from the Anadarko, while crude oil and condensate volumes are expected in the 140,000-170,000 b/d range.
The company maintained its schedule for the formal certificate filing for the Gulf Run natural gas pipeline early next year, with the 2.75 Bcf/d project expected to be placed in service in late 2022. Management continues “to be pretty active talking to folks about ways to increase the size” of Gulf Run, although so far, only Golden Pass Liquefied Natural Gas LNG) has signed on for capacity. The 16 million metric tons/year Texas facility, which was sanctioned in February by sponsors ExxonMobil Corp. and state-owned Qatar Petroleum, agreed to take 1.1 Bcf/d for 20 years.
Enable assumed Henry Hub natural gas prices of $2.40-2.70 and West Texas Intermediate crude oil prices of $50-60 in its 2020 guidance.
Enable reported third-quarter net income of $123 million (28 cents/share), a decrease of $6 million compared to 3Q2018. Distributable cash flow for the quarter was $202 million, down $18 million year/year.