Midstream Oil & Gas
Hello Everyone,
I wasn't really sure as to where to post this, so I thought someone in ER would know a thing or two to get me rolling on this.
I know what midstream companies do. But, for example:
-What's the main difference between a midstream company and a downstream company?
-Midstream gas companies that gather and process natural gas, how do they buy the gas (I assume from an upstream company or an "integrated giant" i.e. Aramco, ExxonMobil)?
-Why would integrated giants sell the natural gas when they can develop it into more valuable products?
-How is it priced when midstream companies buy natural gas?
-How valuable are the gas derivatives (i.e. propane) relative to the raw natural gas?
-What are the costs (ballpark figure) of processing raw natural gas from land-based wells? offshore wells?
-How do pipeline owners and operators (Kinder Morgan) make money?
-Why don't integrated giants own and operate their own pipelines?
-How do storage facility and terminal owners and operators make money?
-Why don't integrated giants own and operate their own terminals?
Thank you in advance :)
Msg me.
Midstream - gather nat gas and transport to refinery. Downstream - everything from the refinery to your engine, propane tank, heating stove, etc.
From the wellhead (chesapeake) they will tie in their gas lines to a gather system that will transport to a pipeline. refineries buy from the pipelines, pipelines buy from the upstream companies.
This question doesn't completely make sense. Integrated is a term for oil and gas companies that develop, produce, process, and distribute hydrocarbons….so they do develop it into more valuable products.
Usually priced by an offtaker who is offering a spread relative to henry hub. (or WTI for crude).
Well, butane and propane are much more valuable than the regular natural gas (methane), which is why refining makes a profit.
Price of processing is the same to the refinery, but I don't think that's your question. Well costs are obviously extremely more expensive in offshore drilling (as are drilling costs with horizontal drilling vs. conventional vertical). Have to remember that wells will produce more nat gas/crude though…
Pipelines make money by transporting hydrocarbons. They get firm contracts from the operators at the well site (anadarko) and they make money off their volumes that they transport to refineries and end markets.
Some integrateds own pipes (Hunt).
Storage facilities make money off the ability to sell natural gas at a higher price than they buy it for. Natural gas is needed to heat homes etc, and can't be used straight from the refinery to your stove without having somehwere to sit while it's not being burned. Basically used to meet load variations and balance pipeline usage.
A lot co-invest in LNG terminals.
Interesting stuff and thank you all very much for sharing.
Some of you mentioned pipelines and I find them interesting. What distinguishes one prospective pipeline company from another pipeline company to build a pipeline for Exxon? Simply the price per unit of hydrocarbon transported from the site to the refinery/processing plant? Surely there has to be something more behind deciding which company should be granted the long term contract?
Thanks
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Midstream O&G (Originally Posted: 07/06/2013)
Regarding capital markets activity, any insight into what banks play the most in this MLP filled space? What about M&A?
For capital markets, Barclays and Citi are strong in midstream. M&A is Evercore, Barclays and TPH
I would say BAML and C on the capital markets side. C, EVR, Barclays on M&A side.
M&A wise here's run down from recent (2012 - Now) big midstream deals via thedeal.com
Inergy / Crestwood ($7b): Crestwood - C/EVR ; Inergy - GHL / Jeff
Atlas / TEAK ($1b) - Atlas - C; TEAK - EVR
Kinder / Copano ($5b): KMP - C; Copano: Barclays / Jeff
CHK Midstream asset sale to ACMP: ($2.6b): CHK - Jeff ; Access: Barc / C Williams: UBS
Rangeland midstream asset sale to Inergy ($425mm): Rangeland - C ; Inergy: Jeff
CHK pipeline assets to GIP ($4b) - CHK - Jeff; GIP: C
Williams / Caiman Energy ($2b) - Williams - Jeff /UBS; Caiman: Barclays / C
Those are all 3rd party. Evercore has killed it in midstream dropdowns lately ($12b drop from SE to SEP; EQT sunrise pipeline to EQM.
Would also note that in any sell-side, damn near every reputable bank is representing someone on the buyside. Obviously only the winning bidder is getting reported though.
I would echo the above. Citi has killed it in the space for both M&A and financing. EVR does a lot of M&A work as well and does a ton of fairness opinions. MS seems like its fairly active as well, with the SE / SEP dropdown and OKE spin, but I'm not sure what else they've done. Barclays and CS don't seem as active in the space as they historically have been.
MS does a lot of MLPs. CS has actually done a decent amount of midstream lately. Citi is killing it, so has EVR
Evaluating Risk in O&G Midstream Space (Originally Posted: 01/02/2014)
Does anybody have any documents/powerpoints that touch on risks present in midstream companys (from a shareholder or debtholders perspective). Thanks in advance.
Interested as well.
I work at a lender dealing primarily in midstream o&g. Would be happy to provide some insight as to what we typically look for in regards to risk if you can maybe give me a couple topics you would like to have covered (if what I do is relevant).
A few things that come to mind without thinking too much.. -Throughput risk (what commodity are you dealing with? what basin? who are the producers? are there minimum volume commitments in place to provide a floor?) -Price risk (you want fee-based contracts, not commodity-sensitive) It's all about the contracts. Additionally, this is the MLP space, so you have to take into account the company's liquidity / access to capital markets to fund growth as most free cash flow is distributed.
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