NEW YORK—There is no clearer signal that midstream concerns are front and center for the energy sector than when those issues are raised organically by multiple company executives at an upstream conference. And so it was here at the Oil & Gas Investment Seminar (OGIS), which began April 9 in midtown Manhattan.

Many presenters, all C-suite officials, stressed that the most efficient and reliable way for their companies to ensure midstream connections that are correct in time and size was for them to handle it in-house. One executive offered a new term for the way independents are coming to view their midstream assets: “operational risk management.”

Several noted that they are working with outside midstream operators, but there was a strong sense overall that the consolidated midstream sector is now less concerned with the granularity of gathering. Into that vacancy, several upstream producers are creating or expanding their own midstream subsidiaries or MLPs. In most cases, those are also poised to add third-party gathering and processing.

The other major midstream theme at OGIS this year was water management. The importance of freshwater supply for fracturing wells to produced-water disposal has been rising in consciousness around the industry for a couple of years. But this was the first time that a majority of executives at OGIS discussed the topic as a salient point in their presentations.

“If your oil is connected by pipeline, your water should be connected by pipeline,” said Richard N. Robuck, senior vice president finance and treasurer at Oasis Petroleum Inc. (NYSE: OAS), a large Bakken player recently moved into the Permian. “If you can’t move water, then you can’t move oil.”

Oasis is also a prime example of an independent producer cultivating midstream operations. “Taking the midstream MLP public was a great opportunity to keep control of our connections,” Robuck said.

Many producers are still relying on fully independent, commercial midstream operators, and are making every effort to coordinate connections when wells come into production. “The midstream has been challenged over the last year in the Wattenberg,” said Barton R Brookman, Jr., president and CEO of PDC Energy Inc. (NASDAQ: PDCE). In a bit of an alphabet soup, the major carrier for PDC in the Wattenberg is DCP Midstream LP (NYSE: DCP).

“Line pressure on DCP has limited our ability to produce at full capacity, but they are doing their best to address that. There are two significant expansions over the next year and a half that will add 400 million [cubic feet] a day of processing by the middle of 2019. Plant 10 will come on this year, and Plant 11 by the middle of next year. And we are already in discussions with them for the next plant after 11. I guess that is just the downside of a liquids-rich play.”

In the Delaware Basin, PDC Energy is investing in water assets upstream and downstream of the wellbores, and is keeping them in-house. “Water is extremely critical, both freshwater and produced. We are investing in storage, pipelines, and disposal wells, all operated by us.”

The emerging value of integral midstream operations extends even to off-shore producers. David M. Dunwoody, Jr., president and founder of Gulf of Mexico independent EnVen Energy Ventures LLC, stressed the importance of pipes both as takeaway for his own production and as revenue source from other producers.

“We own the infrastructure,” said Dunwoody. “That means we can capture economics not just for our own drilling but for surrounding assets. We will be able to charge a substantial premium.” As majors divest their offshore production to independents, he added. “There will be less multibillion investment in offshore infrastructure and more in lengthening tiebacks.”

Even in the Stack, where extensive legacy midstream operations plus hefty new investment should offer producers plenty of commercial options, some are instead choosing to bring midstream in-house. Kingfisher Midstream was an integral part of the $3.8 billion IPO of Alta Mesa Resources Inc. (NASDAQ: AMR).

“When we went public we integrated Kingfisher,” said Hal Chappelle, president and CEO of Alta Mesa. “They were a startup, and we were the anchor shipper. From the get-go, they added other customers. This is definitely a value driver for us. For the balance of the decade lack of access to long-haul pipelines could be a constraint to the play.”

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