An increase in natural gas or crude oil production usually results in higher gathering volumes for MLPs. Let’s look at the production activity in regions where Williams Partners (WPZ) has a major exposure. Let’s start with the US Appalachian region.
The Marcellus and Utica shale plays, which are in the US Appalachian region, are among the most prolific shale regions in the United States. The region continued to experience strong production growth in the fourth quarter. According to the EIA (U.S. Energy Information Administration), the average natural gas production in the region increased 15% YoY (year-over-year) in 4Q17 compared to 4Q16. However, the drilling count in the Utica region has recently declined.
Williams Partners, the largest natural gas gatherer in the Marcellus and Utica regions, is expected to see strong volume growth in the regions in the fourth quarter. EQT Midstream Partners (EQM), MPLX (MPLX), and Antero Midstream Partners (AM) are among the midstream companies that have a significant presence in those two regions.
Williams Partners is the largest natural gas gatherer in the Haynesville Shale region, which has seen a sharp increase in production activity in recent quarters. The rig count in the region increased to 50 at the end of December 2017 compared to 29 at the end of 2016. Natural gas production has increased 30.9% YoY.
Eagle Ford region
Drilling activity in the Eagle Ford region saw a slight recovery in the fourth quarter compared to the previous quarter. Average natural gas production increased 2.1% in 4Q17 compared to 3Q17 and 4% compared to 4Q16. Weak drilling activity in the region could impact Williams Partners’ gathering volume.