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Riders on the Storm: June's MLP Winners and Losers

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Part 7
Riders on the Storm: June's MLP Winners and Losers PART 7 OF 8

What Permian Rig Count Growth Means for MLPs

US drilling activity

US drilling activity has stayed strong amid the recent volatility in commodity prices. The Permian Basin, one of most prolific shale plays in the US, is leading other regions in terms of rig count growth.

According to the recent rigs report published by Baker Hughes (BHI), the rig count in the Permian Basin grew to 370 at the end of June 2017, compared with 319 by the end of May, representing a month-over-month rise of 51.

What Permian Rig Count Growth Means for MLPs

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Energy Transfer Partners (ETP), Western Gas Partners (WES), Plains All American Pipeline (PAA), and DCP Midstream (DCP) all expect to benefit from a strong presence in the Permian.

Behind the Permian are the Cana Woodford Shale and the Eagle Ford Shale, which each saw an increase of 11 rigs during the same period. EnLink Midstream Partners (ENLK) and DCP Midstream both have exposure to these two regions.

US crude oil production forecast

The EIA (Energy Information Administration) expects crude oil production to grow 5.2% YoY (year-over-year) in 2017. Goldman Sachs expects the Permian to lead in crude oil production growth over the next three years, followed by the Scoop and Stack plays. DCP Midstream has exposure to the latter two regions.

US natural gas production forecast

The EIA also expects US natural gas production to grow by 1.8% YoY in 2017. The Northeast region, which includes the Marcellus Shale and the Utica Shale, is expected to lead in terms of natural gas production growth, which is expected to benefit Appalachia-based midstream MLPs like Williams Partners (WPZ), MPLX LP (MPLX), Antero Midstream Partners (AM), and EQT Midstream Partners (EQM).

For an in-depth analysis of Williams Partners, check out Market Realist’s Williams Partners Seeks Safety amid Uncertainty in Energy Sector.

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