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In Bakken crude takeaway race, Tallgrass execs see themselves in 'catbird seat'


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In Bakken crude takeaway race, Tallgrass execs see themselves in 'catbird seat'

Tallgrass Energy LP executives said they were not concerned that a slate of recently announced projects to transport crude oil out of North Dakota will jeopardize the company's own Bakken Shale takeaway plans with a Kinder Morgan Inc. subsidiary.

Tallgrass Pony Express Pipeline LLC and Kinder Morgan's Hiland Crude LLC are looking for shippers to move oil from the Bakken to refineries along Tallgrass' Pony Express oil system and the Cushing, Okla., market through their combined systems, a project that could face competition from the Phillips 66-led Liberty pipeline and Energy Transfer LP's proposed Dakota Access expansion. Tallgrass' advantage is that Pony Express is the "incumbent pipe in the ground" from Guernsey, Wyo., to the Cushing, Okla., oil hub, company President William Moler said.

"I feel like we're sitting in the catbird seat," Moler said during a July 25 earnings conference call.

CEO David Dehaemers Jr. added that crude prices may not support all of the planned Bakken takeaway projects.

"The Bakken has kind of recovered. It's kind of [reached] some new highs. But I think the question in my mind that everybody needs to be asking themselves long term is if $50 to $60 [per barrel] oil in the Bakken [is] going to [facilitate] that 2-million-barrel-a-day-plus market that it probably needs to be to support everything that's being talked about that is not yet built," Dehaemers said. "While crude prices are definitely more healthy than they were, say, three years ago, I'm not convinced, myself, that it's going to stay at that $50 to $60 level, which I hope it does."

Moler, however, declined to provide details on efforts to re-contract Pony Express other than saying Tallgrass has a "quiver of arrows that is diverse."

Meanwhile, the midstream company's Cheyenne Connector pipeline and affiliated Cheyenne Hub Enhancement projects remain in limbo without a blanket certificate from the Federal Energy Regulatory Commission to begin building infrastructure designed to ship up to 600 MMcf/d from the DJ Basin to Tallgrass' Rockies Express Pipeline LLC and Cheyenne Hub and improve bidirectional gas flows at the hub.

"We were supposed to get the certificate in March with the intent of being done in Q4," Moler said. "[Now] we are hoping to stay in Q1 [of 2020]. We have 99.9% of the materials on-site, we have a contractor and equipment on hold, and the day that we get the certificate ... we start excavating and moving forward."

He added that "the FERC approval process has become much slower than what we or others in the industry would like or have experienced in the past."

On July 25, Tallgrass separately reported second-quarter adjusted EBITDA of $254.3 million, up from $202.7 million in the prior-year period, not including merger costs recorded at the time. The S&P Global Market Intelligence consensus estimate of adjusted EBITDA was $247.4 million.