Oklahoma’s Enable Midstream Partners LP has seen an increase in drilling activity around its footprint as commodity prices have improved, with a “substantial” inventory of drilled but uncompleted (DUC) wells sitting behind the company’s system in the Anadarko and Williston basins.
“These DUCs provide an inventory of wells producers can complete without investing additional drilling capital,” CEO Rod Sailor said last week on the fourth quarter earnings call.
There are 75 DUCs behind Enable’s system in the Anadarko and another 82 DUCs in the Williston, according to the company’s chief.
Enable, which announced last month that it was being acquired by Energy Transfer LP, could see potential commercial synergies in the gathering and processing (G&P) segment once the deal has closed, according to Sailor. This includes the opportunity for further integration of Enable’s Anadarko G&P complex with Energy Transfer’s fractionation assets on the Gulf Coast.
“Enable and Energy Transfer’s gathering and processing assets are already connected to each other through our Wildcat project, which links Enable’s Anadarko Basin gathering systems to Energy Transfer’s gathering, processing and transportation assets in Texas,” he said.
The chief also noted that Enable’s transportation and storage assets complement Energy Transfer’s vast interstate and intrastate pipeline system. Enable’s pipeline assets in the Midcontinent and Ark-La-Tex regions already interconnect with several Energy Transfer pipelines, he said.
“Combining Enable’s gathering and processing assets with Energy Transfer’s assets will provide additional scale in key basins.”
As of mid-February, there were 11 rigs currently drilling wells expected to be connected to Enable’s gathering systems, including five in the Anadarko and six in the Ark-La-Tex Basin.
Sailor noted that investors are “growing increasingly concerned of regulatory risk for energy companies” in light of the temporary ban on leases and permits for oil and gas drilling on federal lands. However, “less than 2% of acreage dedicated to Enable rests on federal lands, with most of these federal lands located in North Dakota and Western Oklahoma,” he said.
The Enable chief took the time on the call to address the unprecedented winter storm that hit Oklahoma, Texas and other parts of the central United States last month.
Sailor said Enable employees across the company “immediately went to work around the clock to maximize natural gas deliveries.” This included coordinating with producers to increase the amount of natural gas gathered and working to keep critical Enable infrastructure functioning despite extreme weather.
And while there were “many companies that made extraordinary efforts,” Sailor recognized Continental Resources Inc. for its work to sustain natural gas production and deliveries during the weather event.
“Rather than waiting until the weather passed to restore production, Continental employees worked diligently in extreme conditions to bring critical natural gas supply back online,” Sailor said.
Enable worked closely with Continental to ensure production restoration efforts were focused in areas that could have the most significant impact, according to the CEO. “Continental also secured key pieces of equipment to facilitate winter operations and shared that equipment with Enable to make sure Enable’s facilities could continue to gather, compress and transport natural gas.”
This event, according to Sailor, “demonstrated the strength of Enable’s interconnected natural gas gathering, processing and transportation, and storage systems, which provided Enable with information on natural gas gathering activity and transportation demand to better utilize our natural gas storage assets to facilitate stable supply.”
Projects Moving Forward
Enable last year contracted more than 2 million Dth/d of firm fee-based transportation capacity at a volume-weighted average contract life of over four years, according to Sailor. This included recontracting “substantial capacity” with Enable Gas Transmission LLC’s (EGT) largest customer, CenterPoint Energy Resources Corp., through 2030 and extending most Enable Mississippi River Transmission LLCcustomer contracts through 2024.
The company also continued to make progress on EGT’s MASS (Merge, Arkoma, SCOOP and STACK) project, which is expected to be placed into service by the end of June. MASS, which is underpinned by a firm five-year commitment, would deliver gas from the Anadarko and Arkoma basins to delivery points with access to emerging Gulf Coast markets and growing demand markets in the Southeast.
Enable’s Gulf Run pipeline project also is moving forward, and management expects to receive its final Federal Energy Regulatory Commission certificate in the coming months. The project is backed by a 20-year commitment for 1.1 Bcf/d from cornerstone shipper Golden Pass LNG and is expected to be placed into service in late 2022.
Still, 2020 proved to be a tough year for the midstreamer, with lower volumes reported across the natural gas, crude oil and condensate sectors. Natural gas processed volumes were 2.23 trillion Btu/d in 4Q2020, a decrease of 13% compared to 2.57 trillion Btu/d in 4Q2019. Crude oil and condensate gathered volumes were down 18% year/year.
However, the end of producer shut-ins and continued producer activity on the Enable footprint drove sequential gains in overall natural gas gathered volumes in the fourth quarter relative to the third quarter of 2020, according to management.
Enable reported 4Q2020 net income of $96 million (20 cents/share), up $78 million from 4Q2019. Full year net income was $88 million (12 cents), down $308 million compared with full year 2019.
Distributable cash flow (DCF) was $161 million for the quarter, a decrease of $16 million year/year. DCF was $670 million for full year 2020, down $114 million year/year.
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