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New report considers pipeline activity in northeast Pennsylvania

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World Pipelines,

Energy assets research firm, East Daley Capital Advisors, Inc., has released a new two part report, ‘Righting A Wrong: The Marcellus/Utica Balanced on a Knife’s Edge’, which dissects the interconnection between energy market fundamentals and a company’s future cash flow.

“This new report shows who wins the biggest piece of the total upside of US$1.9 billion in annualised EBITDA for midstream gatherers and long haul pipelines due to expansions coming out of northeast Pennsylvania,” said Justin Carlson, VP and Managing Director, Research at East Daley Capital.

“What’s unprecedented is the literal transfer of wealth from producers to midstream companies in the Northeast because of the new infrastructure builds. Our unique analysis maps this financial ripple effect from producer to each gathering system to each long haul pipeline.”

Part one of the report focuses on the production growth that is centered in northern Pennsylvania and demand markets directly to the east. Part two of the report, to be released later this month, will focus on the Marcellus and Utica in Eastern Ohio, Southwest Pennsylvania and West Virginia. It will also explore the impact on pricing and basis as the US natural gas market is transformed.

“There are some companies that are clearly in a much better financial position than others in the Northeast gas market. Triple digit production and throughput growth rates will not be uncommon for some producers and midstream companies in the next couple of years, while others will barely grow at all,” said Carlson. “This will have serious cashflow implications for many operators in the region. In the Marcellus and Utica, a single market event can impact every party along the value chain from producer, to gatherer, to processor to long haul pipeline. It’s a very dynamic time right now in that region.”

Key findings of the report include:

  • Expansion in northeast Pennsylvania will result in US$1.9 billion in EBITDA, split almost evenly between midstream gathering and long haul pipeline transportation.
  • Higher-risk long haul transport projects account for US$182 million in transportation EBITDA but US$254 million in midstream gathering EBITDA.
  • Productive capacity for producers in northeast Pennsylvania is limited to 14.2 billion ft3/d; 5.2 billion ft3/d higher than current production levels.
  • Williams Partners will realise an upside of US$658 million from northeast Pennsylvania, driven by production linked through their gathering systems to new long haul pipeline expansions.
  • Energy Transfer Partners’ northeast Pennsylvania gathering system will almost double from 16% to 28% of midstream segment EBITDA.

Midstream companies covered in part one of the report include: Williams Partners, Energy Transfer Partners, National Fuel Gathering, DTE, Alta Resources, Howard Energy Partners, Repsol, UGI Corporation, Energy Corporation of America, Cardinal NE Midstream II, Appalachian Midstream Partners, Unit Corporation, XTO Energy and Boardwalk Pipeline Partners.

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