WTI Drops Below $46; Hess Midstream's Bakken Crude Oil Gathering Systems and Related Assets -- RBN Energy -- February 28, 2020

Alpine low? Wow, remember all that excitement about Alpine High. Turns out to be a bust. Apache ditches Alpine High after $3 billion writedown. Wow. 

Apache Corp. is officially calling it quits on a highly publicized but disappointing shale discovery in West Texas after vehemently defending the play’s prospects for about three years.

The Houston-based company posted a roughly $3 billion writedown on its Alpine High project, a find from 2016 that fizzled when it turned out to hold more natural gas than oil.

Apache will instead focus on offshore riches in Suriname, where the explorer recently struck crude and enlisted French oil titan Total SA as a partner.

Comment: I've been saying the same thing for years that the Permian is producing too much natural gas. Look at the EIA dashboards:

• EIA pdf, Bakken: https://www.eia.gov/petroleum/drilling/pdf/bakken.pdf
• EIA, pdf, Permian: https://www.eia.gov/petroleum/drilling/pdf/permian.pdf
• EIA, pdf, Eagle Ford: https://www.eia.gov/petroleum/drilling/pdf/eagleford.pdf

Mexico: Pemex 4Q19 loss widens to $9 billion. AMLO is counting on increased oil revenue to pay for social programs.

Mexican state-owned oil firm Petróleos Mexicanos (Pemex) reported  a net loss of US$8.77 billion  for the fourth quarter of 2019, widened from a loss of US$8.1 billion  for the same period of 2018, mainly due to lower crude oil exports.

Pemex’s crude oil and condensate production averaged 1.712 million bpd in the fourth quarter of 2019, down from an average production of 1.741 million bpd for the fourth quarter of 2018, according to Pemex’s results released today.

The lower production in Q4 2019 versus Q4 2018 was the result of natural decline of production at some mature fields, Pemex said, noting that the decline rate slowed down thanks to production from newer oilfields.

Epic Texas pipeline: update.

• Permian to EPIC's Crane terminal to Robstown, TX (Corpus Christi market)
• initial capacity of 600,000 bbls of oil per day
• full service by April 1, 2020
• will have a total of 5.4 million bbls of operational storage by April 1, 2020, but will eventualy have 7.5 million bbls of operational storage
• yet to complete East Dock; to be operational by 2H02
• West Dock began operations, December, 2019
• EPIC Crude Holdings was formed in 2017 to build and operate the EPIC Crude Oil Pipeline
• 700 miles; Orla, TX (Permian and Eagle Ford) to Corpus Christi, TX

Dominion: to buy regional LNG assets from Southern Company, including Pivotal LNG. Link here but nothing of substance.

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Back to the Bakken

Active rigs:

$45.71	2/28/2020	02/28/2019	02/28/2018	02/28/2017	02/28/2016
Active Rigs	50	67	57	41	38

Only one well coming off confidential list today --  

Friday, February 28, 2020: 63 for the month; 170 for the quarter, 170 for the year:

• 35252, 236, Oasis, Kellogg Federal 5297 44-19 12T, Banks, t9/19; cum 57K 12/19;

RBN Energy: Hess midstream's Bakken crude oil gathering systems and related assets, part 2.  Link here. Archived.

The Bakken was among the first plays to benefit big-time from the Shale Revolution, experiencing a 400%-plus increase in crude production in the first half of the 2010s. The play has had more than its share of challenges, however, including a serious lack of takeaway capacity that spurred the first rapid deployment of modern-day crude-by-rail, followed by a rig-count collapse and major production decline after the mid-decade crash in oil prices. But the Bakken has been roaring back. Crude output there now tops 1.5 MMb/d — some 250 Mb/d higher than its late-2014 peak — and producers have been planning for continued production growth in 2020, though many may be reassessing those plans in light of this week’s coronavirus-related price slide. In any case, production growth is only possible if there’s sufficient gathering infrastructure in place to handle it. Today, we continue our series on crude-related infrastructure in western North Dakota with a look at a leading Bakken midstreamer’s assets.

Over the past four years, Bakken producers have significantly reduced their drilling-and-completion costs and increased their productivity and per-well production. Just as important, their chronic shortfall of pipeline takeaway capacity ended in mid-2017 with the start-up of the Dakota Access Pipeline (DAPL) to Patoka, IL, whose initial capacity of 470 Mb/d has since been expanded to 570 Mb/d. DAPL significantly reduced Bakken shippers’ reliance on crude-by-rail — though substantial volumes are still railed to refineries on the West Coast — and slashed the cost of delivering most of the play’s light crude to Midwest and Gulf Coast markets. We also pointed out that DAPL has been filling up and its co-owners are considering a possible expansion; that a joint venture of Phillips 66 and Bridger Pipeline is developing the new Liberty Pipeline from the Bakken to the crude oil hub in Cushing, OK; and that a number of new gas processing plants are coming online in western North Dakota to handle all the increasing volumes of associated gas produced by the play’s crude-focused wells.

All that sets the stage for continued production growth in the Bakken in 2020 — again, assuming crude oil prices don’t collapse — and the need for new and expanded crude gathering pipelines and related infrastructure. A case in point is Hess Midstream, which owns and operates a large crude gathering network that connects Hess Corp. and third-party wells in the core of Bakken production to two crude oil terminals, a crude header system and a big crude-by-rail facility. (We’ll discuss each of these in a moment.) Owned primarily by Hess Corp. — a leading Bakken producer — and Global Infrastructure Partners, Hess Midstream also has gas gathering pipelines, gas processing plants and produced-water gathering pipelines in the Bakken.