Why the Permian Basin is important for ONEOK Partners


Nov. 26 2019, Updated 9:01 p.m. ET

Permian Basin 

The Permian Basin generally refers to a combination of the Delaware Basin and Midland Basin. The region has multi-stacked producing formations. Currently, it has ~500 rigs operating across it. A multi-stack region has multiple levels of oil and gas resources stacked on top of each other.

Permian Production

Why the Permian is important

From January 2007 to September 2014, crude oil production in the Permian more than doubled—from 0.84 million barrels per day (or bpd) to 1.72 million bpd. According to Chevron Corporation (or CVX), the Midland and Delaware basins were mainly responsible for the 70% increase in oil reserves in the U.S. The increase was a result of extensions and discoveries in 2013.

To learn more about the Permian Basin, read “Why the Permian shale boom transformed US energy markets.”

Higher production benefits ONEOK

CVX operates in the Midland Basin’s Wolfcamp play. It also operates in several plays in the Delaware Basin. In June 2013, the company reached a joint development agreement. It covered 104,000 acres in the Delaware Basin.

Increased production in the basin has been positive for various parties—including upstream, midstream, downstream, and services. Many oil and gas producers—or upstream companies—with assets in the Permian Basin increased their drilling in the area.

Also, increased production created the need for increased midstream infrastructure. Infrastructure is needed that transports hydrocarbons away from production sites to places like oil refineries and natural gas processing plants.

OKS’s natural gas assets in the Permian

ONEOK’s (OKS) WesTex Transmission operates intrastate natural gas pipelines in the Texas panhandle and the Permian Basin. It transport natural gas to the Waha Hub. The Waha Hub acts as an inter-connect among various pipelines for transporting natural gas east to the Houston Ship Channel market.

OKS’s WesTex Transmission consists of ~2,227 miles of pipeline. It has a peak capacity of 750 million cubic feet per day. It also supplies natural gas to 15 processing plants, 15 interstate pipeline interconnections, and six intrastate pipeline interconnections.

Operational synergy

OKS will optimize its processing and gathering capacity in the basin from the increased natural gas liquid (or NGL) supply transported by these pipelines.

The Permian Basin will be a significant addition to OKS’s portfolio. Its portfolio includes the Williston Basin or Bakken, the Powder River Basin, and the Cana Woodford, and the South Central Oklahoma Oil Province (or SCOOP).

Other major midstream master limited partnerships (or MLPs) operating in these basins include Targa Resources (NGLS), Kinder Morgan Energy Partners (KMP), and Williams Partners (WMB). Some of these companies are part of the Alerian MLP ETF (AMLP).

In the next part of the series, we’ll discuss how OKS’s Permian assets will be supplemented by the newly acquired assets from Chevron.

Article continues below advertisement

More From Market Realist