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ONEOK's move away from price exposure pays off; NGL inventories fall with propane exports

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


ONEOK's move away from price exposure pays off; NGL inventories fall with propane exports

ONEOK's move away from commodity price exposure pays off in Q1'16

's efforts to restructurecontracts to reduce commodity price exposure are helping the ONEOK family navigatethe low price environment.

Complementingsteady earnings from its long-term contracts on natural gas transmission pipelines,ONEOK Partners' gathering and processing contracts have become more fee-based overthe past year, CEO Terry Spencer said during the partnership's May 4 earnings call.

"Contractrestructuring in the natural gas gathering and processing segment has significantlydecreased the segment's commodity price sensitivity and was another major contributorto the partnership's first quarter results," he said. "The segment's averagefee rate increased to [68 cents] per MMBtu compared with [35 cents] in the sameperiod last year and [55 cents] in the fourth quarter 2015. We expect the segment'searnings to increase to more than 75% fee-based this year, driven by these contractrestructuring efforts."

NGL stocks fall on strong propane exports; higher production cushionsdrop

The glutof natural gas liquids moderated further in February, as a third consecutive monthof record propane exports reduced the inventory surplus to the five-year averageto the lowest in a year.

The averageNGL barrel was priced at $14.65/bbl on Feb. 29 and compared to $14.17/bbl on Jan.29, according to data from S&P Global Market Intelligence. The calculation ismade using weights fromMidstream Energy Group's June 2012 presentation in which the average NGL barrelcomposition is 42% ethane, 28% propane, 8% normal butane, 9% iso-butane and 13%natural gasoline.

Inventoriesof NGLs fell 17.15 MMbbl in February compared to the previous month and reached147.76 MMbbl, according to data from the U.S. Energy Information Administrationpublished April 29. They were 14.55 MMbbl above the same month a year earlier. Thesurplus to the five-year average fell to 38.09 MMbbl and was the smallest surplussince February 2015. "The NGL glut continues to moderate amid tapering supplygrowth and robust exports," Jefferies analyst Chris Sighinolfi wrote in a noteMay 2.

Propane prices rise as focus shifts to export growth

The propanemarket gained ground in the week ended May 6 based on expectations that export numberswould continue to grow in the months to come. Lower crude oil and natural gas pricesoffered a drag.

LoneStar pipeline grade propane at Mont Belvieu increased 3.40 cents to trade at 49.00cents per gallon in the week ended May 6, while non-LST propane gained 4.05 centsto trade at 49.60 cents per gallon. Prices at the hub in Conway, Kan., advanced3.75 cents and traded at 46.25 cents per gallon.

The fracspread increased 1.87 cents to 23.10 cents per gallon on May 5 and compared to 21.23cents per gallon on April 28, according to data from S&P Global Market Intelligence.Prices of natural gas fell 0.1% between the two dates while the price of the averageNGL barrel gained 4.6%.

Phillips 66 Partners to acquire pipeline, fractionation assets from Phillips66

has reachedan agreement with sponsor Phillips66 Co. to acquire the Standish Pipeline and the remaining 75% interestin Phillips 66 Sweeny Frac LLC in a $775 million deal.

SweenyFrac LLC owns the recently completed Sweeny Fractionator One, a 100,000 barrel perday NGL fractionator located at Old Ocean, Texas. It also owns the Clemens Cavernsstorage facility, located approximately 15 miles southeast of Sweeny. The facilitywill have the ability to store 7.5 million barrels of Y-grade NGL, propane and butane.

The StandishPipeline carries refined petroleum products from Phillips 66's Ponca City Refineryin Ponca City, Okla., to the partnership's North Wichita Terminal in Wichita, Kan.

Enterprise starts up NGL processing plant in New Mexico

's200-MMcf/d cryogenic natural gas processingfacility in New Mexico has started commercial operations.

The SouthEddy plant in Eddy County can extract up to 25,000 barrels per day of NGLs and issupported by long-term, fee-based agreements, Enterprise said in a May 3 news release.

Supplyingthe plant will be about 90 miles of high-pressure gathering lines. A 71-mile extensionof Enterprise's Mid-America pipeline system has also been completed, providing DelawareBasin producers with NGL takeaway capacity and access to Enterprise's NGL network.