Some takeaways (pun intended):
But of course the main concern with Permian producers these days is adequate takeaway capacity, both for oil and natural gas. As a result of transportation bottlenecks, many producers in the region are seeing significantly lower realized prices. [C]urrently Midland crude futures are trading at a $12/bbl discount to WTI, and the strip widens throughout the summer to $14/bbl in August.
Note that FANG's realized oil price during Q1 was $61.66/bbl ($56.82 after hedging). That's very strong and has to do with the majority of FANG's production being shipped via pipelines.
The key going forward is the company's announcement of a 50,000 bpd agreement on the Gray Oak pipeline. I covered the Gray Oak pipeline in [an earlier] Seeking Alpha article. Phillips 66 always seems to be ahead of the pack when building critical pipeline infrastructure (consider the Bakken Pipeline System and Sand Hills NGLs pipelines, for instance) and Gray Oak is not only a winner in terms of its potential for 1 million bpd of transport, but also its connection to Buckeye Partners' Corpus Christi terminal that will load VLCCs for exporting Permian crude to global markets.
I hate hedging. LOL. Apparently, so does Harold Hamm, and several others in the Bakken.As most of you know, US refining capacity for light-sweet shale oil has topped out, so new production will have to exported - that is the key moving forward. Gray Oak can solve this problem for Permian (and Eagle Ford) producers. I expect strong subscription announcements for the Gray Oak pipeline at the close of the second open season - which is currently in progress.
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