Commodity Prices Impact Midcoast Energy’s Operations



Midcoast Energy’s natural gas throughput volumes

Midcoast Energy Partners’ (MEP) natural gas throughput volumes fell in the second quarter of 2015 compared to both the previous and the year-ago quarter. The decrease was primarily attributable to the low commodity price environment for natural gas and NGLs (natural gas liquids). Low prices resulted in reductions in drilling activity by producers in MEP’s areas of operations, which impacted its throughput volumes.

The above graph shows MEP’s natural gas throughput volumes over the last six quarters. Natural gas prices have been declining since the fourth quarter of 2014. Prices continued to remain low throughout the first half of 2015.

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MEP’s assets are primarily located in the East Texas Basin, the Fort Worth Basin, and the Anadarko Basin. Midcoast Energy Partners is expanding operations in the East Texas Basin by constructing new assets. It also acquired New Gulf Resources’ midstream assets in the region. MEP also put a cryogenic processing plant in service near Beckville, Texas, in May 2015.

MEP’s NGL production volumes

MEP’s volume of NGLs produced also declined year-over-year in 2Q15. The decline was attributed to the low NGL price environment. Its peer ONEOK Partners (OKS) reported a year-over-year increase in 2Q15 NGL volumes sold, transported, and fractionated. OKS’s volumes growth was due to acquired and newly added assets. You can read more about it in ONEOK Partners Sees 2Q15 Boost from Natural Gas Liquids Segment. ONEOK Partners forms 4.5% of the Global X MLP ETF (MLPA).

Crestwood Midstream Partners’ (CMLP) NGL and crude services segment, on the other hand, performed poorly in 2Q15. You can read more about it in Which Segments Drove Crestwood Midstream’s 2Q15 Performance?

Some other MLPs with natural gas gathering and processing assets include DCP Midstream Partners (DPM), EQT Midstream Partners (EQM), Energy Transfer Partners (ETP), Targa Resources (NGLS), Tallgrass Energy Partners (TEP), Southcross Energy Partners (SXE), and Summit Midstream Partners (SMLP).

In addition to volumes, the type of contracts impact MEP’s earnings. We’ll look at that in the next part of this series.


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