Weak gas processing margins prompted Mitchell Energy &Development to cut its natural gas liquids (NGL) production by morethan 20% – roughly 10,000 barrels/d. “With the collapse in thecrude oil market, gas processing margins are pretty ugly rightnow,” said George P. Mitchell, CEO. “NGLs have tracked the slide incrude prices due to weak demand and higher imports. Strong gasprices are adding to the squeeze in processing margins since makingup the volume shrinkage that occurs when we extract the liquids isa cost. With NGL inventories in the U.S. running at 10-year highs,we decided to cut back where it makes economic sense.

“Overall, we don’t expect our gas processing business to beprofitable in the second quarter, but the higher gas prices thatare squeezing NGL margins do help improve gas production revenues.We’re also leaving ethane in the gas stream at our Bridgeportplant, so that will increase revenues, too.”

On July 1, Mitchell halted processing altogether at the Katy andSeven Oaks, TX, plants and began rejecting a portion of the ethaneproduced at its largest plant at Bridgeport, TX. July NGLproduction is expected to run about 35,000 barrels/d, versus nearly45,000 barrels/d during the first two months of Mitchell’s secondfiscal quarter.

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