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A new $1.75 billion natural gas pipeline went into service in Texas on Wednesday with enough capacity to supply 10 million U.S. homes per day. Analysts say the region now needs four or more just like it.
Kinder Morgan Inc started commercial service on its 2 billion cubic feet per day (bcfd) Gulf Coast Express natural gas pipeline slightly ahead of schedule, providing much-needed takeaway capacity from the Permian region in West Texas and eastern New Mexico.
The Permian is the biggest U.S. production area for crude and the second biggest for natural gas. Output in the basin is at record highs and is growing.
Oil drilling produces a lot of associated gas in the Permian, some of which drillers have been burning off or flaring at record rates because there was not enough space on existing pipes to move it to market.
That lack of pipeline capacity caused gas prices in the Permian to turn negative earlier this year, forcing some producers to pay others to take their gas.
Apache Corp, one of the pipeline’s customers, said it already started using the Gulf Coast Express, which was originally expected to enter service in October. Earlier in the year, the company said it decided to leave some gas in the ground rather than flare or sell it at an uneconomic price.
The Gulf Coast Express should alleviate the region’s pipeline constraints, until the pipe fills up, which analysts expect will happen fairly quickly. That will leave the market waiting for the next big pipeline, also Kinder Morgan’s, due to enter service in late 2020.
“We have long expected a quick fill of Gulf Coast Express from three sources – new production, existing production that is currently being flared and rerouting gas that is now flowing in directions that are not as economically alluring as sending it to the Gulf Coast,†said Rich Redash, head of global gas planning at S&P Global Platts Analytics.
Redash said the Permian still needs four more pipes like Gulf Coast Express to transport about 10 bcfd of additional gas that is expected to be produced in the region between 2018 and 2030. The Permian currently produces about 15 bcfd.
Drillers flared a record 0.663 bcfd of gas in the Permian in the second quarter as both oil and gas production in the basin rose to all-time highs, according to data from Rystad Energy.
Analysts said that flaring in the basin will likely decline at least temporarily now that Gulf Coast Express is in service.
The pipeline will provide shippers with access to numerous customers along the Gulf Coast, including industrial users like refineries and petrochemical facilities, utilities, liquefied natural gas export terminals and Mexican markets.
When Kinder Morgan started filling Gulf Coast Express in August, gas prices at the Waha hub NG-WAH-WTX-SNL in West Texas rose to their highest since March, cutting the premium of the U.S. Henry Hub NG-W-HH-SNL benchmark in Louisiana over Waha to its lowest since January.
So far in September, Henry Hub’s premium over Waha averaged just $1.04 per million British thermal units, its lowest since January when the average was 92 cents. That premium reached $2.70 in April, its highest since November 2005.
Analysts said Henry Hub’s premium over Waha could fall further as more Permian pipes are built, including Kinder Morgan’s 2.1-bcfd Permian Highway in 2020 and MPLX LP’s 2.0-bcfd Whistler in 2021.
“We need at least four more pipes in addition to the three that are already going forward (Gulf Coast Express, Permian Highway and Whistler) to meet growing output in the Permian and help reduce flaring,†said Charif Souki, chairman of U.S. LNG company Tellurian Inc, which is developing an LNG facility in Louisiana and a few pipelines, including one in the Permian.
Source: Reuters
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Valaris Limited announced new contracts awarded subsequent to issuing the Company’s most recent fleet status report on February 21, 2023. Three-year contract with Petrobras for drillship VALARIS DS-8. The rig will be reactivated for this contract. The total contract value is approximately $500 million, including a $30 million mobilization fee. 100-day contract with a TotalEnergies affiliate for drillship VALARIS DS-12. The contract is expected to commence in second quarter 2023. 70-day contract with Beach Energy offshore New Zealand for heavy duty modern jackup VALARIS 107. The contract is expected to commence in third quarter 2023. The total contract value is approximately $26 million. President and Chief Executive Officer Anton Dibowitz said, “We are particularly pleased to have secured the award for preservation stacked drillship VALARIS DS-8, for a contract that is expected to generate a meaningful return over the firm contract term, and we remain focused on exercising our operational leverage in a disciplined manner. This most recent award represents the sixth contract awarded to one of our high-quality stacked floaters since mid-2021, and speaks volumes about our demonstrated track record of project execution when reactivating rigs.” Dibowitz added, “Following the reactivation of VALARIS DS-17 and DS-8, we will have ten floaters working across the golden triangle, including four drillships in Brazil, a market where we expect to see continued growth over the next several years.” Updated Guidance As a result of the contract awarded to VALARIS DS-8, which will require the rig to be reactivated from preservation stack, we are updating our first quarter 2023 and full-year 2023 guidance provided on our fourth quarter 2022 conference call on February 21, 2023. First Quarter 2023 Contract drilling expense is expected to increase by approximately $5 million to $385 million to $395 million. Adjusted EBITDA is expected to decrease by approximately $5 million to negative $5 million to breakeven. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $25 million to $30 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Full-Year 2023 Revenues are anticipated to be $1.8 billion to $1.9 billion, unchanged from the guidance provided on our fourth quarter 2022 conference call. Contract drilling expense is expected to increase by approximately $60 million to $1.49 billion to $1.59 billion. Adjusted EBITDA is expected to decrease by approximately $60 million to $180 million to $220 million. Adjusted EBITDAR, which adds back one-time reactivation expense, is expected to be $280 million to $320 million, unchanged from the guidance provided on our fourth quarter 2022 conference call. Capital expenditures are expected to increase by $60 million to $320 million to $360 million. Source: Valaris Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Seadrill Limited announced that the West Neptune has executed approximately six months of term extensions with LLOG Exploration Offshore, L.L.C in the US Gulf of Mexico. The extensions will commence in direct continuation of the existing term, and will keep the rig busy until Q3 2024, furthering Seadrill and LLOG’s long-term association. Total contract value for the extension is approximately $79 million. Source: Seadrill Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
Semisub rig owner Dolphin Drilling has inked a new contract with Peak Petroleum in Nigeria for its 1974-built Blackford Dolphin. The firm contract, which follows the letter of award in January, gives the Euronext Growth-listed owner of three rigs the potential to extend the unit’s backlog by a minimum of 120 days and up to 485 days. The deal adds to and will be a direct continuation of the previously announced 12-month contract with General Hydrocarbon Limited (GHL). Øystein Stray Spetalen-backed company said the effective dayrate associated with the minimum firm period of the contract is $325,000, including the mobilisation fee. “The final award of the contract for Blackford Dolphin shows the opportunities in Nigeria at a strong dayrate, in addition to building on the backlog for the rig. It also underlines the attractiveness of our assets, and we look forward to returning to revenue-generating operations in 2023,” noted Bjørnar Iversen, CEO of Dolphin Drilling. Source: Dolphin Join our mailing list here We are #1 on Google and Bing for the "Largest Mobile Energy Network" Come join our community! Download the Rig Lynx app here
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