Favorable growth opportunities and improved basis differentials are likely to emerge from the Rockies as the western leg of Rockies Express Pipeline LLC (REX-West) prepares to start commercial operations in March, according to Questar CEO Keith Rattie, who spoke glowingly about his company’s links to the new pipeline as a part of a conference call Wednesday reporting 8% and 14% profit growth in the fourth quarter and all of 2007, respectively.
Questar reported that net income was up for the fourth quarter and overall year ($130.8 million and $507.4 million in the fourth quarter and all of 2007, respectively, compared with $121.5 million and $444.1 million for the fourth quarter and all of 2006, respectively).
Noting that calendar year 2008 price quotes Tuesday showed a $1.38 basis between Nymex and Northwest Pipeline prices for wholesale natural gas, and widening in 2009 and 2010, Rattie said the natural gas wholesale market is “looking at very strong growth in production in the Rockies.” And he sees this as translating in to additional opportunities for his Salt Lake City-based production, pipeline and distribution utility company.
At the end of January about 8 Bcf/d of production was flowing out of what he called the “relevant part” of the Rockies, according to Rattie, who spoke during the question-and-answer session with analysts.
The 8 Bcf/d coming out of the Rockies most recently is “probably an all-time record,” Rattie said. “Producers are drilling away, anticipating more favorable price basis in the next several years, and our view remains based on the growth projections that [Rockies] producers are making to their shareholders. We think we will see basis get wide again in 2011, and we’ll need another export pipeline out of the region.”
Questar sees at least five and maybe six added interstate pipeline proposals bidding to fill that future need, assuming one of them gets the necessary shipper support.
On hedging, Questar plans to continue what it is doing and will add hedges for its newly acquired Louisiana properties when that deal closes later in the year. Rattie said that when REX-West goes into service there will be increased pressure on Mid-continent basis.
“We would expect that REX will take volumes off some of the other pipes out of the Rockies and force to the east gas that traditionally flowed out of the Midcontinent area north to the Chicago-area market,” Rattie said.
In response to a question from an analyst, Rattie said Questar has had discussions with many of the sponsors of the proposed additional Rockies pipeline projects. “They are, of course, keen to secure producer commitments and are looking for our help in making the case with other producers in the region as well as our own producer-affiliates.
“We think the best way for Questar to add value is through a low-cost expansion of Overthrust Pipeline, which connects the major supply hub in the Rockies [Opal, WY] to the supply hub coming out of the Picance [Basin]. Our pipeline runs right through the heart of where the supply growth is going to be in the next several years, and we can offer low-cost expansion capacity to support one of the export pipe projects as we did with REX.”
©Copyright 2008Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |