Trench Warfare


ETP is digging a moat in Northern Louisiana (NLA) with its pending $640 million acquisition of PennTex and a $160 million acquisition of DPM’s North Louisiana assets in June. ETP will be the only midstream G&P in a confined acreage block owned by Range Resources. The prize in NLA is capturing Range’s Wet Haynesville/Cotton Valley production growth in the Terryville area, located in Lincoln Parish, LA. However, PennTex locked in long-term MVCs (thru 2031) for 100% of its processing capacity with MRD before Range acquired the producer in early-2016. These contracts were negotiated at a time when NGP was the PE fund invested in both MRD and PennTex, and these contracts led to decreased market share for both ETP and DPM (chart to right). PennTex discloses a partial loophole in its 10-K that gave MRD the ability to process gas at DPM plants that count toward the PennTex MVC. Thus, ETP was required to purchase both company’s assets in order to lock down its control in NLA. Currently, 5 rigs are active in the area which is enough to maintain production levels, but this count is down from 11-12 rigs operating last year before MRD cut its drilling program in response to low oil prices. ETP is counting on Range ramping its drilling operations back to 2015 levels, which could add more than 500 MMcf/d of supply by the end of 2019. (Ticker: ETP)

About The Author Justin Carlson

I have over 10 years of experience in data analysis, research, and consulting across the energy sector. I currently serve as Vice President of Research and Managing Director at East Daley Capital, an energy assets research firm that is changing how investors look at midstream energy risk with an asset-driven information service that combines proprietary research with a trusted team of unbiased, experienced energy analysts. My insights and analysis bring greater transparency to the energy financial market by quantifying potential risks by asset and enabling investors to make more informed and accurate projections and investments. Prior to joining East Daley Capital, I was a senior manager at Platts, a division of McGraw Hill Financial, which acquired Bentek Energy, where I was a senior member of the leadership team.