Increased drilling and production activity usually results in higher gathering volumes for midstream MLPs. In this article, we’ll look at the production activity in the regions where Williams Partners (WPZ) has major exposure. Let’s start with the US Appalachia region.
The US Appalachia region, which includes the Marcellus and Utica shale plays, is among the most prolific shale regions in the country. The US Appalachia region experienced strong production growth 1Q18.
According to the EIA (Energy Information Administration), average natural gas production in the region increased 15.3% YoY in 1Q18 compared to 1Q17. However, the drilling activity in the Utica region has remained weak in recent months, which could be a slight concern for the limited partnership.
Williams Partners, which is the largest natural gas gatherer in the US Northeast region, is expected to experience strong volume growth from the region in the first quarter. MPLX LP (MPLX), EQT Midstream Partners (EQM), and Antero Midstream Partners (AM) are among the other midstream companies that have a significant presence in the two regions.
Williams Partners is also the largest natural gas gatherer in the Haynesville Shale. The region has experienced a sharp increase in production activity in recent quarters. The rig count in the region increased to 57 at the end of March 2018 compared to 42 during the same period in 2017. At the same time, natural gas production grew by a massive 32.0% YoY.
Eagle Ford region
The drilling activity in the Eagle Ford region saw a slight recovery in 1Q18 compared to 4Q17. Average natural gas production in the Eagle Ford region rose 2.0% in 1Q18 compared to 4Q17 and 8.8% compared to 1Q17.