When it comes to natural gas, the new takeaway pipeline capacity coming online this winter in the Northeast is illustrated below:
Specifically, between now and the end of the withdrawal season, an additional 4.5 Bcf/d of takeaway capacity will be in service, transporting natural gas from the Northeastern Appalachian production region to Midwest and Southeast markets and allowing pipelines to more easily meet demand needs.
Among the large projects is Energy Transfer's Rover pipeline (3.25 Bcf/d) which will move natural gas from Appalachia to the Midwest, as illustrated below:
The Rover pipeline will be completed in three phases. The first phase (0.7 Bcf/d) was granted in-service authorization in August 2017. The second phase (1.4 Bcf/d) will be in service by year end. The third phase (1.15 Bcf/d) is estimated to be in service in March 2018. According to S&P Global Platts, 2.95 Bcf/d of the project is subscribed by binding commitments.
The other large pipeline project is TransCanada's Leach XPress (1.5 Bcf/d), as illustrated below:
This project will bring natural gas from the Appalachian basin to the Southeast. Although it was expected to be complete this Fall, there were many delays and it's now expected to be in service in Jan 2018.
And there is also Williams' Atlantic Sunrise that will transport up to 1.7 Bcf/d from the Marcellus shale in Pennsylvania to markets in the U.S. Mid Atlantic and Southeast. Given that the U.S. Court of Appeals for the District of Columbia dissolved the Nov. 6 stay last month, the pipeline is expected to be in service by mid-2018, as illustrated below:
As such, I don't foresee a repeat of 2013-2014 with natural gas prices spiking over US$5/mmbtu even if polar vortex hits the US more than once this winter.
Moreover, I forecast that inventories will not fall below 1,600 BCF at the end of the withdrawal season and Henry Hub price will be at or above US$3/mmbtu for the most part of 2018. This remains a preliminary projection and will be revised over the next weeks as finalized temperature and pipeline data is integrated into my model.
Lastly, these developments have positive implications for two group of companies:
1) The chief beneficiaries (main shippers) for the increased capacity are producers that have staked out prime positions in that region and are dominating the Marcellus and Utica plays, although some have backed down on drilling in light of the spread between Henry Hub and Marcellus natural gas price. There producers are totally or primarily focused on this region such as Range Resources (RRC), EQT Corporation (EQT), Cabot Oil & Gas (COG), Southwestern Energy (SWN), Antero Resources (AR) and Epsilon Energy (EPS.T, EPSEF).
2) And there are those with a big presence in the Appalachian region such as Chevron (CVX), CONSOL Energy (CNX), ExxonMobil (XOM) through XTO Energy, Chesapeake (CHK), Anadarko (APC) Gulfport Energy (GPOR), Enerplus (ERF) and privately-held HG Energy LLC based in Parkersburg, W.V., that acquired Noble Energy's (NBL) upstream Marcellus assets in northern West Virginia and southern Pennsylvania for $1.225 billion last May. NBL had to sell these assets to reduce its debt resulting from the Clayton Williams Energy (CWEI) transaction, which materially expanded the company’s core Delaware Basin position.
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