Phillips 66 Approves Funding for Two Midstream Projects in Southeast Texas - $3 Billion

February 18, 2014 Kirk Eggleston

Funding for two Southeast Texas midstream projects was approved in early February 2014 by Phillips 66's board of directors. Costs for the construction of a fractionator in Old Ocean, TX, announced in August of 2013, and a liquefied petroleum gas export terminal in Freeport, TX, are an estimated $3 billion combined.

According to Phillip's 66, the projects will create more than 50 full-time jobs and over 1,000 temporary construction jobs.

“It’s an extraordinary time of opportunity for our company and our industry, especially in the rapidly growing midstream space,” said Tim Taylor, executive vice president, Phillips 66 Commercial, Marketing, Transportation and Business Development. “Given the anticipated growth in natural gas liquids production, we see substantial advantages in having fractionation and export facilities on the Gulf Coast outside of Mont Belvieu. These projects allow us to maximize our existing infrastructure and will position us for further growth.”

Fractionator Located Close to Sweeny, TX Refinery

The "Sweeny Fractionator One" will be located close to the company’s Sweeny Refinery, and will supply purity natural gas liquids (NGL) products to the petrochemical industry and heating markets. Y-grade (mixed NGL) supply to the fractionator will come from nearby major pipelines, including the recently completed Sand Hills Pipeline.

The 100,000 bbls per day NGL fractionator is expected to be completed and online in the third quarter of 2015.

Liquefied Petroleum Gas Export Terminal in Freeport, TX

The "Freeport LPG Export Terminal" will be located at the company’s existing marine terminal in Freeport, Texas, and will allow growth for Phillips 66's midstream, transportation and storage infrastructure on a global scale. According to the company estimates, the terminal will have an initial export capacity of 4.4 million bbls per month, with a ship loading rate of 36,000 bbls per hour. The export terminal is expected to come online in mid-2016.

Fractionators are used to separate a raw NGL stream into its various components (ethane, butane, propane, etc.)

Sand Hills NGL Pipeline In Service & Moving Permian & Eagle Ford Liquids

June 24, 2013 R.T. Dukes

DCP Sand Hills Pipeline Map - Eagle Ford Segment

The Sand Hills NGL Pipeline is online and taking NGLs from the Permian & Eagle Ford regions to fractionation facilities in the Gulf Coast and near Mont Belvieu.

The pipeline is 720 miles and runs from West Texas, near Midland, into South Texas on to Mont Belvieu. The pipeline will have initial capacity of 200,000 b/d and could be expanded to 350,000 b/d if needed.

“Sand Hills and Southern Hills provide a solution to the critical need for vital transportation capacity from key liquids producing regions,” said Wouter van Kempen, CEO.

DCP has a total of 1.3 bcf/d of processing capacity in the Permian and will have 1.2 bcf/d of capacity in the Eagle Ford once the Goliad Plant is completed in early 2014.

The Sand Hills in service was announced in conjunction with the in service of the Southern Hills NGL pipeline that moves liquids from the Midcontinent region to the Gulf Coast.

Read the full press release at dcpmidstream.com

Talisman Energy Shopping For Eagle Ford Buyers

June 19, 2013 R.T. Dukes

Talisman Energy has retained the Royal Bank of Canada to determine if buyers are interested in the company's Eagle Ford acreage.

Talisman previously announced plans to divest $2-3 billion in non-core assets. The Eagle Ford is a core holding, but there are hopes the company could get as much as $2 billion for its 74,000 acres and 30,000 boe/d (2013 guidance).

Talisman has already transferred operatorship of three rigs to Statoil, so the company's operations are smaller today. Statoil will operate half of the JV's acreage once they get to full scale. Talisman and Statoil agreed to an Eagle Ford JV in 2010.

The most logical buyer is Statoil, but we'll have to wait to see if the company has the confidence in the area to pay a premium for complimentary acreage.

Talisman estimates its Eagle Ford acreage holds:

450 mmboe in resource
1,000 gross remaining well locations
Wells are 60% liquids
Average IP is 1,100 boe/d
Well costs average $8.5 million

A Reuters article also noted:

“One of the sources said that outperformance by peers in the Eagle Ford could be adding to pressure on the Calgary, Alberta-based company.”

Read the full article at reuters.com

Kinder Morgan & Phillips 66 Eagle Ford Crude Delivery Deal to Supply Sweeny Refinery

August 29, 2012 R.T. Dukes

Kinder Morgan (KMP) and Phillips 66 have reached an Eagle Ford crude delivery deal. KMP will build a 12-inch, 27 mile lateral from its Eagle Ford Crude Condensate pipeline to Phillips 66's Sweeney Refinery in Brazoria County.

Phillips is committing to take a "significant portion" of the pipeline's initial 30,000 b/d of capacity. The pipeline will have the potential to be expanded to 100,000 b/d if needed.

KMP will invest approximately $90 million in the project, which also involves adding associated receipt facilities by constructing a five-bay truck offloading facility and three new storage tanks with approximately 360,000 barrels of crude/condensate capacity at Kinder Morgan’s DeWitt Station in DeWitt County, Texas, and Wharton Pump Station in Wharton County, Texas. Pending receipt of environmental and regulatory approvals, construction is scheduled to begin in the fourth quarter of 2012.

Kinder Morgan's Eagle Ford Crude Condensate pipeline was brought online in June of 2012.

Read the full press release at kindermorgan.com

ConocoPhillips Revenue Down in Q1 - Eagle Ford Activity Up

April 23, 2012 R.T. Dukes

ConocoPhillips (COP) is in the process of spinning off its crude oil refining business into a new company named Phillips 66. The company reported lower revenues than expected in the first quarter of 2012. I'm sure the details of the split are distracting corporate executives, but there isn't any sign of letting up in the Eagle Ford. Conoco ran an average of more than 16 rigs targeting the Eagle Ford during the first quarter of 2012. That's up two rigs from 14 during the fourth quarter of 2011.

The company is on pace to grow production to more than 60,000 boe/d in 2012 and to almost 120,000 boe/d in 2013. For those counting, that's 100% growth this year and 100% growth next year. In the Eagle Ford, the company reports industry leading performance with wells that breakeven at $37/bbl WTI. ConocoPhillip's 200,000 plus acres span the border of the black oil and condensate window in the play (Lavaca, DeWitt, Karnes, Live Oak, and McMullen counties), where the company reports the Eagle Ford will produce 77% liquids. That's good news in today's natural gas price environment.

ConocoPhillip's average well comes online at more than 700 bbls per day and will produce over 175,000 boe in the first year of its life. That puts first year revenue, for the average well, in the neighborhood of $10 million. Consider a 20% royalty burden and the company is operating wells that have around a 1-year payout.