NGL Energy Gets Momentum at DJ Basin, Permian Delaware
NGL Energy Partners LP, which transports oil and treats, recycles and also disposes of water generated as part of the power generation process – said its start-up was slow in 2021 due to winter storm Uri and the aftermath persistent pandemic.
But the Tulsa-based company sees better days ahead with crude prices comfortably above $ 60 / bbl and signs of activity picking up in the Permian Delaware oil sub-basin in West Texas and New Brunswick. Mexico as well as the Denver-Julesburg (DJ) Basin in Colorado.
NGL “is well positioned for its fiscal year 2022 as crude prices, producer volumes and demand for raw materials have all increased after a difficult 2021 fiscal year,” said CEO Michael Krimbill.
“Our water solutions segment continues to drive ‘growth’ and we look to take full advantage of our Delaware Basin platform over the coming year,” he added.
Krimbill presented that outlook on Thursday along with fourth quarter 2021 tax results, covering the three-month period ended March 31.
During this stretch, Uri wreaked havoc, bringing freezing conditions as far south as the Texas border with Mexico. This halted oil production, refinery activity and related work for about two weeks in February.
NGL treated 1.4 million barrels / day of water in the last quarter, down 18% per year, due to Uri as well as lower development activities and production volumes related to the energy industry response to coronavirus outbreaks since March 2020.
At its crude logistics unit, volumes on the Grand Mesa pipeline averaged 66,000 b / d in the last quarter, compared to 131,000 b / d a year earlier. In addition to customer bankruptcy issues, the company has noted a drop in demand from refineries due to the Uri-related outages on the Gulf Coast. Grand Mesa originates in Colorado and extends southeast to NGL’s crude oil storage terminal at the Cushing hub in Oklahoma, providing delivery capability to DJ oil producers.
Speaking on a call with analysts, however, executives said Uri’s impacts were short-lived and, more importantly, the oil industry is rebounding as coronavirus vaccines are proving to be efficient, economic activity is accelerating and demand for crude-derived transportation fuels.
“We are excited about the rising and stabilizing crude oil prices and the return of production growth in the DJ Basin and we also expect an increase in producer demand for our Grand Mesa pipeline capacity,” Krimbill said.
While large US state-owned companies have brought oil production under control so far this year, small private companies have started to reopen the taps and, though oil prices hold above $ 60 / bbl as they l ‘have been doing for most of 2021, the biggest players may follow suit again this year. . This would benefit the transport, processing and disposal operations of NGL.
Increasing activity and volumes in the DJ Basin and Delaware Sub Basin will be key to the company’s performance in its fiscal year which began in April, said CFO Robert Karlovich.
“The oil production and completion activity in the Delaware Basin and associated water will be the primary driver of our performance,” Karlovich said on the winning call. “We are also seeing increases in other basins, but the Delaware basin is by far the largest and most important. Disposal volumes will continue to be the primary driver.
He also noted the agreement reached in May between Bonanza Creek Energy Inc. and Extraction Oil & Gas Inc. to merge into an all-stock transaction valued at approximately $ 2.6 billion. The combined exploration and production company, reportedly called Civitas Resources Inc., would operate on approximately 425,000 net acres in the DJ Basin.
“The growth of DJ Basin’s production will also be significant, especially through the combination of Extraction and Bonanza Creek, as our most important contracts in the crude logistics segment are with these producers, and we will be linked to their production volumes on Grand Mesa. “
NGL reported a net loss of $ 229.2 million for its fourth quarter of fiscal 2021, down from $ 223.0 million a year earlier.