Permian – update through October 2018
As always, good reading here. Of note are a couple charts in the comment section from Dennis Coyne. Take a look at his second chart that shows expected output from the Permian in pink.
Chron: Refining, Pipelines, and Solaris
Chron: California company seeks to build $1 billion refinery in Permian Basin
Kermit is directly east of $TPL’s surface land in Loving, Reeves, and Culberson counties. The quote below speaks to the sheer amount of physical activity in the Permian right now.
With the increase of 18-wheelers and other vehicles on the roads of the Permian Basin, Prentice said the refinery will take advantage of locally produced crude oil and sell the gasoline and diesel locally.
“If the refinery were in operation right now, every single barrel would be sold within 100 miles,” Prentice said. “There’s been such an increase in demand.”
Chron: Two pipelines hold joint open season to move crude oil from Permian Basin to Houston Ship Channel
This is some of the end-of-2019 capacity we’ve been hearing about.
As construction for the 850-mile Gray Oak Pipeline draws to a finish, a joint venture led by Phillips 66 Partners has teamed up with Houston pipeline operator Kinder Morgan to move crude oil to more destinations.
Designed to move 900,000 barrels of crude oil per day by the end of the year, one of the end points of the Permian Basin to Gulf Coast pipeline is the Phillips 66 Sweeny Refinery in Brazoria County.
Chron: Solaris Water Midstream begins water recycling operations in the Permian Basin
I may have saved the best information for last here. Important to know that Solaris started its build out in 2015/2016. Two year head start relative to $TPL.
Launched in November 2015 and financially backed by the private equity firm Trilantic Capital Partners North America, Solaris Water Midstream sources and delivers freshwater to drilling operations and moves and recycles oilfield wastewater.
The company reports having 16 current customers already either connected or in the process of connecting to its Pecos Star System.
A subsidiary of Marathon Oil Company signed a long-term contract for water services in a 369,000-acre area of Lea County, New Mexico that will allow for a 125-mile expansion of the Pecos Star pipeline network.
Once the construction for the expansion is complete, the Pecos Star System will include more than 300 miles of large diameter permanent pipelines and more than 200 miles of temporary pipelines.
Dividend Declaration Day Is Nearing
If the pattern of the last few years holds true, $TPL will declare its 2019 dividend payments later this month. What is your over/under on the special*?
*pay no attention to the Bloomberg forecast
Source: Bloomberg
Mission Advisors
My never ending quest to find and link all available $TPL analysis on the web continues. Here are a few pieces from 2017 written by Mission Advisors. Will dig in post some quotes in the coming days.
https://missionadv.com/an-introduction-to-texas-pacific-land-trust-tpl/
https://missionadv.com/an-introduction-to-texas-pacific-land-trust-pt-2/
https://missionadv.com/an-introduction-to-texas-pacific-land-trust-pt-3/
Waterfield Midstream Makes a Splash
Blackstone Energy Partners Press Release
We’ve heard this story before. Substitute TPL and EOG for Waterfield and Anadarko.
Waterfield is led by Co-Chief Executive Officers Scott Mitchell and Mark Cahill, who previously built and led Anadarko’s and Western Gas’s Permian Basin commercial water infrastructure platform. Since partnering with Blackstone last summer, Waterfield has put together a highly skilled team that brings together upstream and midstream technical expertise with a deep understanding of the subsurface and operating characteristics of the Permian Basin. This expertise positions Waterfield to provide reliable, turn-key services for its customers.
Waterfield’s progress should be of interest to TPL follows as there are parallels between the two entities. Waterfield appears to be well capitalized and has a strong management team; looks like prime competition.
MRT: Blackstone bets $500 million on growing full-cycle water management trend
“It used to be (water management) was trucking water to saltwater disposal wells. Then the next generation was to pipe water to SWDs to get trucks off the road and enjoy the economic benefits of pipelines,” said Cahill, an engineer who got his start at Chevron. “I think we’re entering the next phase, where you’ll see subsurface expertise. It’s not just pipes and facilities but knowing where you’re putting the water and how you’re putting the water,”
“The eye-opener for us was when we were talking to other producers and we were talking about our focus on the subsurface, and no one else was looking at the subsurface,” Mitchell said. “That gave them comfort things would be done right. It dawned on us that this is how it will be done.”
He said producers have been reluctant to grant water management to other companies “because it’s so critical and it has to be done right. They know the subsurface, so they’re reluctant to hand it off to someone without that expertise.”
Already, Waterfield has a 15-year contract with Guidon Energy to construct a new system to handle Guidon’s water gathering and disposal needs across its 40,000-acre position in Martin County. That system, which will target deeper disposal zones, is expected to come online by mid-year. Waterfield also has an agreement with EagleClaw Midstream to operate EagleClaw’s Reeves County water assets — 58 miles of gathering lines and 390,000 barrels per day of permitted water disposal capacity.
Those contracts have met the company’s goal of “planting our flag, getting a platform in the Midland Basin and the Delaware Basin,” said Cahill.
15 year contracts are music to my ears.
Surfs Up in Culberson
The Gray Lady Speaks
How a ‘Monster’ Texas Oil Field Made the U.S. a Star in the World Market
Last year alone, the Permian’s production rose by a million barrels a day, and it could surpass the Ghawar field in Saudi Arabia, the world’s biggest, within three years. Now producing four million barrels a day, the Permian generates more oil than any of the 14 members of OPEC except Saudi Arabia and Iraq.
As many as 15 oil and gas pipelines serving the Permian are expected to be completed by the middle of 2020, potentially increasing exports from the Gulf of Mexico fourfold to eight million barrels a day after 2021, according to a recent Morningstar Commodities Research report.
“I will have work here forever,” said Mike Wilkinson, a truck driver who came from Dallas a year ago and moved into a trailer with his teenage daughter. “As hard a place as this is to look at, they are going to need guys like me to move equipment around here for years to come.”
With a major acquisition in New Mexico last year, Exxon Mobil became the most active driller in the basin, and projects that it will increase production fivefold by 2025. Also growing rapidly here, Chevron estimates that one in six of every barrels it produces globally will come from the Permian by 2021.
“For Shell, the Permian is absolutely critical,” said Gretchen Watkins, president of Shell Oil. “The Permian is massive; it’s a game changer for U.S. shale. It is the powerhouse field.”
