Annual Midstream Rankings: DCP Midstream Tops Both Charts

Consolidation has played a key role in the midstream the past year and is reflected in Midstream Monitor’s annual rankings of the top natural gas processors and natural gas liquid (NGL) producers for 2012. This holds true as two previously ranked companies—Southern Union and Energy Transfer Partners (ETP) —now fall under the same general partner: Energy Transfer Equity (ETE). For the purposes of our rankings, Energy Transfer officials asked that we refer to this combined entity as Energy Transfer Enterprise.

ETE acquired Southern Union in early 2012, which combined with the acquisition of Regency Energy Partner’s general partner and Sunoco Logistics Partners, has given the combined entities an equity value of more than $50 billion. ETE’s diverse operations include more than 69,000 miles of pipeline, 51 natural gas processing plants, two fractionators and 2 billion cubic feet per day of liquefied natural gas (LNG) import capacity along with 4,900 Sunoco gasoline retail locations.

Astute observers will notice that the production and processing figures for the combined Energy Transfer entity are lower in the rankings than the companies held separately last year. The reason for this discrepancy is that ETE officials removed some double counting in previous figures as well as adhered to our criteria more closely.

The standards used to compile our rankings remain the same as last year when we asked owners of processing plants and fractionators to submit their full processing and production totals at their facilities for 2012. In years prior to 2011, we based our rankings on first-party processing and production volumes, which wasn’t indicative of the largest midstream companies.

However, this year we further worked with companies to hone in on how to properly account for these figures. This has led to some changes in the rankings for both 2012 and 2011, reflected in the tables below. Primarily these changes were related to reflect U.S.-only production and processing totals rather than North American totals. The companies with the largest impact in these figures were Encana and Chevron.

These are the most representative figures of the top midstream operators that we have ever compiled and published. There were no estimates or double counting of figures and the companies better understood our methodology and criteria. This was most reflected in the change in ONEOK Inc.’s figures from 2011 when they were estimated. As it turns out these figures were estimated too high as they included double-counted volumes.

In our updated rankings, the combined Energy Transfer Enterprise entities remained in a retroactive eleventh place in the natural gas processor rankings and moved up one slot from sixth to fifth in the top NGL producers’ rankings.

However, the company’s volumes grew greatly in both cases through this combination as the processing totals rose 18% from 884 million cubic feet (MMcf) per day in 2011 to 1.045 MMcf per day in 2012 while the NGL production totals rose from 68,300 barrels (bbl.) per day.

As impressive as this growth was, the company has even bigger plans. While speaking at Hart Energy’s Marcellus-Utica Midstream conference earlier this year, Rick Cargile, ETP’s president of midstream, said that by 2015, ETE will be the largest NGL producer in the U.S. with 450,000 bbl. per day.

This goal will be fueled by building critical mass as it organically builds liquids-focused assets in the Marcellus and Utica, the Eagle Ford, Barnett and Permian.

While ETE is eyeing the top spot in the future, DCP Midstream remained the largest NGL producer for the sixth-straight year and surpassed Enterprise Products Partners as the largest natural gas processor. This was the first time that any company held the top position in both rankings.

DCP Midstream experienced a slight increase in its gas processing figures in 2012 as they rose to 6.1 billion cubic feet per day from 6.079 MMcf per day in 2011. The company’s liquids production growth was much greater as it rose 5% from 383,021 bbl. per day in 2011 to 401,914 bbl. per day in 2012.

Interestingly, DCP Midstream’s ascent to the top of both rankings follows a similar path to the way in in which ETE is now growing. The company can trace its history back more than 80 years ago, but it really began to make its mark when DCP Midstream LLC was formed in the early 2000s. The formation of the company, which is jointly owned by Spectra Energy and Phillips 66 and owns the general partner of DCP Midstream Partners, allowed DCP Midstream to create its super-system strategy of fully integrating its midstream services.

This strategy allows legacy assets to be tied together so that they operated in tandem with a large footprint in various regions throughout the country rather than independently to create flexibility and reliability.

“We think it’s a competitive advantage for us as it enables us to reroute volumes in a region if one facility goes down,” Wouter van Kempen, chairman, president and chief executive of DCP Midstream told Midstream Monitor. The company’s super-systems are located in the Midcontinent, DJ and Permian basins and the Eagle Ford shale. We will have much more on DCP Midstream in next week’s feature.

While Enterprise Products Partners may have slipped in our natural gas processor rankings, their numbers were largely unchanged from the previous year, and it was a close call at the top between them and DCP Midstream. In addition, their NGL production grew at a larger rate than DCP Midstream.

For 2012, Enterprise experienced a 1% drop in processing volumes from 6.131 MMcf per day in 2011 to 6.052 MMcf per day for 2012 and saw its NGL production climb 13% to 343,600 bbl. per day in 2012 from 303,000 bbl. per day in 2011.

While speaking at the National Association of Publicly Traded Partnership’s (NAPTP) annual MLP investor conference earlier in May, the company’s Chief Executive Mike Creel said growth has been focused on liquids as its NGL services and pipeline division is its largest division with its crude oil segment growing at an even faster rate.

This growth has been achieved, in part, because of its first-mover status in the Rockies, and it is also a first-mover in another area: liquefied petroleum gas (LPG) exports. In 2012, Enterprise loaded 46 million bbl. of LPG from its export terminals and expects to load approximately 62 million bbl. this year.

In 2012, the largest export markets for propane from Enterprise terminals were South America at 17.3 million bbl. and Mexico at 10.8 million bbl. Other destinations are Central America, Europe, the Far East and the Caribbean. Creel said more destinations will be added when the Panama Canal is opened up in 2014.

In order to meet supply with demand levels, Enterprise announced plans to build one of the largest propane dehydrogenation units along the Gulf Coast. This facility, expected to begin operations in the third quarter of 2015, will consume up to 35,000 bbl. per day of propane and produce 1.65 billion pounds per year of polymer grade propylene.

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.

Contact the author, Frank Nieto, at fnieto@hartenergy.com