Enterprise buys $3B of Permian Basin natural gas assets. Market recovery slows amid omicron

A $3 billion deal saw a Houston-based oil and gas midstream company buy natural gas processing facilities in the Permian Basin, aiming to up its presence in the region.

Enterprise Products announced its acquisition of Navitas Midstream Partners Monday for $3.25 billion, purchasing about 1,750 miles of pipelines and up to a billion cubic feet per day of natural gas processing capacity in the Midland sub-Basin on the eastern side of the Permian in Texas.

The added capacity included completion of the Leiker Plant, expected in early 2022, with an expected capacity of 240 million cubic feet per day.

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In buying Navitas’ assets, Enterprise hoped to enter the prolific Permian Basin, one of the U.S.’ most active oil and gas fields. The Midland Basin, per an Enterprise news release, represents about 20 percent of U.S. onshore drilling.

Enterprise is already active in the Delaware Basin on the western side of the Permian, operating multiple facilities in southeast New Mexico and West Texas.

The Navitas system was supported by long-term contracts and acreage dedications from more than 40 producers, the release read.

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Following the sale, Enterprise hoped to increase its visibility by servicing up to 10,000 drilling locations in the next 15 years, extracting crude oil, natural gas and natural gas liquids (NGL).

“The Navitas management team has developed a premier system in the heart of the Midland Basin. The Delaware and Midland Basins are the two most attractive regions in the U.S. in terms of crude oil, natural gas and NGL reserves with each having up to nine geologic horizons,” said A.J. Teague, Enterprise co-chief executive officer.

“We do not have a natural gas or NGL presence in the Midland Basin other than downstream pipelines. This acquisition will give us an entry point into the basin.”

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Randy Fowler, co-CEO of Enterprise said the move would augment the company’s existing operations in the region to include both of the Permian’s sub-basins and lead to future growth.

“The system, including its large footprint of low pressure natural gas gathering, is an attractive processing franchise that provides value added services to producers,” Fowler said. “This investment will provide Enterprise with an attractive return on capital and support additional capital returns to our limited partners through distribution growth and buybacks of common units.”

And as more natural gas is extracted and processed in the Permian Basin, Lucid Energy hoped to reduce the environmental impact of such operations, announcing Tuesday it received approval from the U.S. Environmental Protection Agency for a carbon sequester project in Lea County.

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Lucid planned to sequester carbon dioxide (CO2) underground from its Red Hills Gas Processing Plant, reducing emissions from the facility and allowing Lucid’s customers to meet pollution reduction targets.

“Since our entry to the Delaware Basin five years ago, Lucid has targeted investments in large-scale gas treating assets, which empower our customers to develop highly economic drilling locations with associated off-spec gas,” said Lucid CEO Mike Latchem. “This strategy has proven beneficial for all stakeholders, as Lucid currently removes more CO2 from Permian Basin shale production than any other midstream operator.

“We are committed to finding safe, creative and effective ways to serve the growing needs of our customers while reducing our environmental footprint.”

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Oil and gas rigs also increased in the Permian Basin, with Baker Hughes reporting 292 basin-wide rigs as of Friday, a dip of one rig in the last week but up 113 in the last year.

New Mexico added a rig in the last week for a total of 95 as of Friday, records show, a growth of 26 rigs in the last year.

And Texas dropped three rigs in the last week for a total of 274, per the report, but was up 113 from the same date in 2021.

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Globally, natural gas and liquified natural gas (LNG) could lead investments in oil and gas in 2022, which were expected to climb to $628 billion, per a report from Rystad Energy, marking a 4 percent increase from $602 billion invested in 2021.

Upstream gas and LNG investments were expected to grow 14 percent from $131 billion in 2021 to $149 billion in 2022, with analysists expecting investments to surpass pre-pandemic levels of $168 billion in 2019 within two years, climbing to $171 billion in 2024.

Meanwhile, upstream oil investments were forecast to climb from $287 billion in 2021 to $307 billion this year – a 7 percent growth.

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Audun Martinsen, head of energy research at Rystad said the COVID-19 health crisis and recent spread of the omicron variant continued to slow oil and gas’ regrowth, but the markets were expected to recover, albeit gradually.

“The pervasive spread of the omicron variant will inevitably lead to restrictions on movement in the first quarter of 2022, capping energy demand and recovery in the major crude-consuming sectors of road transport and aviation,” Martinsen said.

“But despite the ongoing disruptions caused by COVID-19, the outlook for the global oil and gas market is promising.”

Adrian Hedden can be reached at 575-618-7631, achedden@currentargus.com or @AdrianHedden on Twitter.

This article originally appeared on Carlsbad Current-Argus: Enterprise buys $3B of Permian gas assets. Market slows amid omicron