The more things change, the more they stay the same.

In last year’s Midstream Business Midstream Rankings, we noted that consolidation was a major story heading forward and that has certainly been the case.

Kinder Morgan Energy Partners LP (NYSE: KMP) acquired Copano Energy LLC; Crosstex Energy merged with Devon Energy’s (NYSE: DVN) midstream assets to form general partner EnLink Midstream LLC (NYSE: ENLC) and MLP EnLink Midstream Partners LP (NYSE: ENLK); EnCana Corp. (NYSE, TO: ECA) created MidCoast Energy Partners LP (NYSE: MEP); Williams Cos. Inc. (NYSE: WMB) acquired Access Midstream Partners LP (NYSE: ACMP); and Energy Transfer Partners LP (NYSE: ETP) continued to reap the benefits of its myriad midstream holdings.

However, the dominant players at the top of our rankings remain the same as they have for seven straight years with DCP Midstream Partners LP (NYSE: DPM) and Enterprise Products Partners LP (NYSE: EPD) holding the top two spots in our top gas processors and top NGL producer rankings.

The criteria for our rankings remains the same, with results based on all processing volumes processed and produced at companies’ processing plants and fractionators for the 2013 calendar year. Our results are tabulated a year later in order to allow for final accounting of figures by companies.

DCP Midstream

DCP Midstream remains the only company to top both of our rankings as it did so for the second straight year. The company reported a 6% increase to 425,597 barrels per day (bbl/d) on its already impressive NGL production total from 2012 of 401,914 bbl/d.

Perhaps the most impressive aspect of our rankings is that not only does DCP Midstream’s NGL production figure represent the largest sums for this year—it is also the largest sum Hart Energy has recorded in any of our previous rankings dating back to the 1990s. Similarly DCP Midstream’s gas processing figure of 6.14 billion cubic feet per day (Bcf/d) is the largest total we’ve reported for a pure midstream company.

Both of DCP Midstream’s results are a direct result of the company’s organic growth strategy, which has seen it build on its current footholds to create super-systems that allow it to achieve critical mass by connecting assets and operations in several of the most important plays in the country such as the Permian Basin, the Denver-Julesburg (D-J) Basin, Midcontinent, the South Central Oklahoma Oil Province (SCOOP) and Eagle Ford Shale.

Since 2010, DCP Midstream has seen its NGL production increase 20% as it builds on a disciplined growth strategy that has the company’s assets gathering or processing about 12% of all U.S. gas. “We believe this is a business where size and scale really matters and with our leadership position, we have it in spades,” Wouter van Kempen, chairman, president and CEO of DCP Midstream, said during the National Association of Publicly Traded Partnerships’ MLP Investor Conference this spring.

He noted that over the past five years, DCP Midstream has transformed from a top gathering and processing company to a fully-integrated midstream company. “We are continuing to integrate our processing assets to build systems that give us a competitive advantage and greater reliability.”

The Eagle Ford has grown at such a large rate that DCP Midstream’s system in the play reported it was operating at 85% of its 1.2 Bcf/d of processing capacity as of August. The D-J Basin is another area that the company is excited about heading into in 2015; DCP Midstream expanded its O’Connor processing plant in the play to 160 million cubic feet per day (MMcf/d) in March. The facility is now operating between 85% and 90% of capacity and the company is on track to bring its 200 MMcf/d Lucerne 2 processing plant online in mid-2015.

“The D-J Basin is an exceptional growth area and now with regulatory uncertainty resolved, we will continue to see volume growth and infrastructure needs as E&P companies deploy large amounts of capital in the drilling programs in this prolific area,” Bill Waldheim, president, DCP Midstream Partners, said during a recent earnings call.

The company is one of the largest processors in the Permian and has multiple processing plants in the works for the play with plans to connect them to its Sand Hills Pipeline to create a larger system in the region.

Enterprise Products Partners

Enterprise Products Partners’ 379,000 bbl/d of NGL produced in 2013 was a record for the company and was the third-largest total in our ranking’s history. The company experienced a 10% drop in processing volume compared to 2012, but its 5.45 Bcf/d was still 1 Bcf/d greater than third-placed Willams.

Part of the reason for the increase in NGL production and a similar drop in processing volumes was Enterprise's integrated approach that is heavily tied into both the supply and demand functions of the industry.

"At Enterprise we are constantly focused on building and improving the systems aroun which we build our businesses, which is very different from managing a portfolio of assets," Jim Teague, COO of Enterprise Products Partners, said during a recent conference call to discuss earnings.

"People who come here from other companies have told me that it takes them a while to grasp the Enterprise integrated value chain model. They soon realize that it is more than a model. It's our culture. At Enterprise we understand our role on each side of the supply-demand equation: the value of bringing supplies and markets together," he continued. This equation has seen Enterprise shift its focus towards projects to provide producers with outlets to new markets via a combination of existing assets and greenfield projects.

While Enterprise's most high profile projects over the past year have focused on export opportunities, the company remains committed to the domestic markets. In fact, these exports should help to improve domestic demand for NGL by finding an outlet for excess products.

Runners-up

Last year at Hart Energy's Marcellus-Utica Midstream conference, ETP's president of midstream Rick Cargile said that the company would be the top NGL producer in the U.S. by 2015 with 450,000 bbl/d. Based on its 2013 results, this prediction has a very strong chance of coming true as it more than doubled its production from 94,600 bbl/d in 2012 to 206,900 bbl/d.

A great deal of this growth can be attributed to the evolution the company has had in the Eagle Ford. In 2010, ETP had the fifth-largest processing capacity in the play. In the four years since, ETP has grown its processing capacity by 175% and is now the second-largest processor in the play behind Enterprise Products Partners.

Much of the overall progress is due to the financial benefits and flexibility that the Energy Transfer family of companies, which include ETP, Regency Energy Partners LP (NYSE: RGP) and Southern Union Co., have found through a shared general partner in Energy Transfer Equity LP (NYSE: ETE). The Energy Transfer family has an enterprise value of about $100 billion with an increased focus on liquids-rich projects throughout the most prolific shale plays in the country.

This flexibility has provided Energy Transfer with the ability to grow through both organic projects as well as acquisitions. Since 2010, the Energy Transfer family has spent more than $32 billion on organic projects with another $15 billion or more in development in addition to its high profile mergers and acquisitions deals that have included interests in Southern Union, Sunoco Logistics Partners LP (NYSE: SXL), and Regency. Future growth is expected to occur through new processing and fractionation projects among other opportunities.

As we did with Energy Transfer last year, Midstream Business worked with several companies that merged or combined assets near the end of 2013 or in 2014 to combine these figures for their 2013 totals. While these companies may not have been merged for all of 2013, it helps to provide a strong outlook for where these companies are headed for 2014.

Another company that is benefitting from combined assets is EnLink Midstream Partners, which was created earlier this year through the merger of Crosstex Energy and Devon Energy’s midstream assets. The combination of these two entities helped to move them up to the sixth largest processor in the country despite a 10% decrease in volumes. There was also a dip in NGL production for the combined company, but this should change in the coming years thanks to the investment grade credit rating that EnLink has secured and the goal of $1 billion to $2 billion per year in capital investments until 2017 due to having a low cost of credit.

The company already has assets in many of the country’s top shale plays, including the Barnett, Permian, Cana Woodford, Arkoma Woodford, Eagle Ford, Haynesville and the Marcellus-Utica. EnLink plans on focusing on the Cana Woodford, Utica and Permian for future growth.

Barry Davis, EnLink’s president and CEO, highlighted its projects to expand by building a new 120 MMcf/d processing plant in the Permian and its expansion of its gathering system in the play for $200 million as the sort of projects the company will focus in order to double its size by 2017. “There is a lot of activity around our core areas of operation, which is where you should expect to see EnLink continue to grow,” he said during a recent earnings call.

Arguably the largest midstream deal this year was Kinder Morgan’s acquisition of Copano Energy in May, which helped make Kinder Morgan the largest midstream company in the U.S. This was evidenced by the appearance of Kinder Morgan, traditionally a pipeline-focused company, appearing in Midstream Business’ rankings for the first time.

The company was ranked as the eighth largest NGL producer with 78,234 bbl/d, a 20% increase over Copano Energy’s 2012 total of 65,446 bbl/d. This was the same ranking the company held last year, but future growth can be expected as the company is currently reporting that 34% of its revenue is now generated from gathering and processing operations.

Although the company failed to place in our top 10 gas processing companies, it was just outside of this ranking and can be expected to crack the list in the future as it works to leverage the former Copano gathering and processing assets and expertise.

One new name in our rankings that isn’t a result of a merger is Midcoast Energy Partners, which was split off from Enbridge Energy Partners as a new MLP consisting of the company’s natural gas and NGL midstream business. This move was undertaken to improve the midstream group’s cost of capital while also improving the focus of operations by splitting crude and gas/liquids from each other.

Midcoast Energy is already a large player in the midstream as it ranked as the fourth largest gas processor and the sixth largest NGL producer. While organic growth will remain an avenue for continued upward mobility, Greg Harper, the company’s principal executive officer, said that Midcoast is aggressively pursuing accretive acquisition opportunities going forward.

“We are focused on executing on our $1 billion organic growth program through 2017. We are working diligently in the near-term to attract and secure new business to our existing gathering and processing footprint, while looking for opportunities to strategically step out from our existing asset base to diversify into new basins and enhance market access,” he said during the company’s second-quarter 2014 earnings call.

For the first time ever all of the entrants in the top processors category had daily figures above 1 Bcf/d. The smallest daily NGL production was more than 75,000 bbl/d. Given the costs involved to achieve these figures via large-scale infrastructure, it is likely that the biggest changes will be movements among the top companies rather than new entrants and companies falling out of the rankings.

Hart Energy has made every reason­able effort to ensure the veracity of this information. Neither Hart Energy, Midstream Monitor, Midstream Business nor any other party involved in the presentation of this material will be held liable for any errors or omissions.

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