A recent one-two punch in the Rockies has left oil and gas producers and midstreamers reeling to predict an uncertain fallout from two back-to-back events in an already head-shaking year.
When Okla. City-based Chesapeake Energy officially filed for bankruptcy June 28th, a tsunami of Plan Bs—many already in place—flooded midstream operators that held contracts with producers to gather, process and flow crude oil, natural gas and NGLs from the Bakken, Powder River Basin, South Texas, and Appalachia.
Crestwood Equity Partners LP (NYSE: CEQP) is a publicly traded master limited partnership that owns and operates midstream assets located primarily in the Bakken Shale, Delaware Basin, Powder River Basin, Marcellus Shale, Barnett Shale and Fayetteville Shale.
Now, one week later, the U.S. District Court in Wash., D.C. has handed down a decision to shut down and completely drain the 1,172-mile Dakota Access Pipeline (DAPL). DAPL is a major pipeline artery out of the Bakken, transporting 570,000 BPD of crude oil from N.D., to Ill., where it connects with Energy Transfer’s crude oil pipeline that extends to South Texas markets. Energy Transfer and its DAPL partners have 30 days from July 6 to comply with the ruling. Energy Transfer plans to appeal.
For at least one midstream operator, the untimely crush of events between Chesapeake’s bankruptcy and DAPL has resulted in a go-forward plan to assure its Bakken producer customers in these precarious times.
Houston-based Crestwood Equity Partners’ operations gobble up a chunk of the nation’s midstream map with crude oil, natural gas, and NGLs assets that include gathering and processing, storage, and transportation predominantly in the Bakken, Powder River and Marcellus. Chesapeake just happens to be a longtime Crestwood customer in the Bakken. And Crestwood’s Arrow gathering system there connects to the DAPL.
So, how does a midstream operator get ahead of two hard punches in a week?
You get in front of it. Exactly as Crestwood has. The company immediately issued an update to its shareholders ensuring it had prepared for the Chesapeake bankruptcy and remains well-positioned to maintain full operations throughout the bankruptcy proceedings to include gathering and processing natural gas with more than 320 Chesapeake wells connected to Crestwood’s Jackalope system.
In response to the DAPL situation, Crestwood has assured its customers that, no matter how the ball swings following court appeals, the company can ensure downstream market access via its Arrow system for 100% of its producer customers’ crude. The Arrow system connects to DAPL, Hiland and Tesoro pipelines. In addition, Crestwood can transport crude volumes to its COLT Hub Facility in N.D., by pipeline or truck. COLT is the leading crude oil terminal in the Bakken with multiple pipeline connections, storage capacity of 1.2 MMBbls, and rail loading capacity of 160 MBPD.
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