Which Segment Will Drive DCP Midstream’s 2Q16 Performance?

DCP Midstream Partners’ (DPM) Natural Gas Services segment mainly provides natural gas gathering, processing, compression, and transportation services. Natural Gas Services is DCP Midstream’s largest business segment.

The segment’s 2Q16 performance might be negatively impacted by a decline in natural gas prices and a decline in Eagle Ford throughput volumes. The average US natural gas price by the end of 2Q16 was $2.3 per MMBtu (million British thermal units), compared with $2.70 per MMBtu during the second quarter of 2015. Enable Midstream Partners (ENBL) and Summit Midstream Partners (SMLP) are among the midstream MLPs that are exposed to natural gas prices through their natural gas processing businesses. We’ll look at the trend in Eagle Ford production in the next article. These negatives might be offset by recent projects placed into service including the Lucerne 2 plant in the DJ Basin system and the Keathley Canyon project at Discovery, and a higher fractionation spread.

DPM’s NGL Logistics segment provides NGL (natural gas liquid) transportation and fractionation services. The segment’s 2Q16 operating performance is expected to be driven by the ramp-up of the Sand Hills and Front Range pipelines and higher NGL throughput volumes due to a rising demand.

DPM’s Wholesale Propane Logistics segment is involved in Propane Marketing. The segment’s adjusted EBITDA might be negatively impacted by a decline in propane sales volume due to higher temperatures in 2Q16 than in 2Q15. This might be slightly offset by higher unit margins.