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MPLX Bullish on Natural Gas Growth as Permian, Marcellus Bottlenecks Targeted
MPLX LP is bumping up its capital spending by $50 million in 2023 to work toward debottlenecking pipeline constraints and expanding gathering and processing (G&P) capacity in the Permian Basin, as well as the Bakken and Marcellus shales.
MPLX has set aside $800 million of growth capital for the year, with another $150 million earmarked for maintenance.
In the Logistics and Storage business unit, the midstream company is working with its partners to expand Permian takeaway with the addition of three compressor stations along the Whistler Pipeline. The additions would boost pipeline capacity to 2.5 Bcf/d from 2.0 Bcf/d, with in-service targeted for the third quarter.
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Work also continues on the associated ADCC Pipeline lateral, a 43-mile, 42-inch diameter natural gas extension from the Agua Dulce Hub in South Texas to Corpus Christi LNG. Cheniere Energy Inc., which has a 30% stake in the pipeline, sanctioned the third stage of the Corpus liquefied natural gas export project last summer.
MPLX’s Shawn Lyon, vice president of operations, told investors on the quarterly earnings call Tuesday that volumes and commitments to the Whistler system have remained strong in spite of the recent decline in natural gas prices.
“We anticipate those all to continue on into ‘23,” he said. “You’re going to see volatility up and down on natural gas, but again, there’s strong volume demand for the gas takeaway out of the Permian.”
MPLX recorded an average 6.2 Bcf/d in gathered volumes during the fourth quarter of 2022, an increase of 14% year/year. Processed volumes rose 1% to an average 8.6 Bcf/d. Fractionated volumes averaged 583,000 b/d, up 6% year/year.
MPLX also is a partner in the greenfield Matterhorn Express project in the Permian. The 42-inch diameter pipeline would traverse 490 miles, with direct connections to processing facilities in the Permian Midland sub-basin. It also would have a direct connection to the 3.2 Bcf/d Agua Blanca Pipeline, a joint venture between WhiteWater Midstream LLC and MPLX.
COO Gregory Floerke said crude oil, natural gas and natural gas liquids (NGL) prices in 2022 were “very supportive of increased drilling activity” by exploration and production companies across all basins. The increased drilling, along with completions heading into 2023, are what’s driving management’s higher volume outlook for the year, according to the executive. Therefore, short-term price swings are not currently expected to impact volumes as much.
“Certainly, there has been price volatility. We’ve seen prices over $10/MMBtu in the summer… and now we’re kind of back to more of a normal level,” Floerke said. But in the Permian and Bakken, “the drilling is really tied to the crude price, and we see the benefits of associated gas and NGLs that come off of that.”
The COO said the MPLX management team is communicating with producer customers and while forecasts can change, “at this point, we still feel bullish about volume this year.”
As such, the midstreamer continues to work toward bringing online its sixth 200 MMcf/d processing plant in the Permian, Preakness ll, in the first half of 2024. MPLX brought online its 200 MMcf/d Torñado ll processing plant in 4Q2022.
In the Marcellus, MPLX is progressing Harmon Creek ll, a 200 MMcf/d processing plant that also is expected online by June 2024.
Gathered volumes in the Marcellus averaged 1.4 Bcf/d in 4Q2022, down 1% from a year ago. Processed volumes averaged 5.5 Bcf/d for the quarter, off 2%, while fractionated volumes averaged 518,000 b/d, up 7%.
“Even outside of the Marcellus, I think everybody realizes now there’s a structural change in gas from a lot of perspectives,” CEO Michael Hennigan said. “You’re starting to see rigs in other basins outside of the Marcellus that haven’t had a lot of activity. Overall, people are recognizing a structural change in gas now.”
MPLX reported net income of $816 million (78 cents/share) for 4Q2022, compared with $830 million (78 cents) in the year-earlier period. Full year 2022 net income was $3.94 billion ($3.75/share), up from $3.08 billion ($2.86) in 2021.
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