Crestwood Equity Partners LP had a net loss of $23.4 million in first-quarter 2020, compared with net income of $14.1 million in first quarter 2019. The company has cut $80 million in costs through cancelled or delayed expansion projects, employee and contractor layoffs, elimination of discretionary spending, and a refocused community engagement program.
Based on agreements signed in February 2020, on Apr. 1, Crestwood closed on the purchase of NGL terminal assets from Plains All American Pipeline LP for about $160 million, adding about 7 million bbl of NGL storage, a multi-year supply agreement with Plains, and additional access to transportation capacity from Mont Belvieu.
The company anticipates that increasing demand, resulting from the lifting of government restrictions in the months ahead, coupled with significant global supply reductions will drive improved commodity prices by end-2020 and into 2021 and that the relative quality of acreage dedicated to its gathering systems and processing plants in Bakken, Powder River, and Delaware basins should benefit Crestwood when the industry recovery begins.
During first-quarter 2020, Crestwood’s Bakken shale Arrow system averaged record crude oil gathering volumes of 129,000 b/d, 39% higher than first-quarter 2019, natural gas gathering volumes of 119 MMcfd, 59% higher than first-quarter 2019, and water gathering volumes of 89,000 b/d, also 59% great than first-quarter 2019. Natural gas processing volumes were also a record of 110 MMcfd, an increase of 251% over first-quarter 2019. Volumetric increases were driven by 30 three-product and seven water-only well connections in the first quarter, debottlenecking projects completed throughout 2019, and the in-service of the 120-MMcfd Bear Den II processing plant in August 2019 (OGJ Online, Aug. 14, 2019).
For second-quarter 2020, based on current market conditions, Crestwood does not expect new well-connect activity and anticipates some producers will electively shut-in production on a well-by-well basis resulting in decreased volumes quarter-over-quarter. In second-half 2020, Crestwood anticipates producers will begin to return shut-in wells to full production and new well-connect activity will resume once crude oil demand increases, WTI pricing stabilizes, and physical crude oil pipeline and storage limitations are alleviated. Several Arrow producers continue to operate rigs under contract and based on conversations with those producers, Crestwood estimates producers will connect about 20 three-product wells and build a drilled-but-uncompleted (DUC) inventory of 20–30 wells on the Arrow system in back-half 2020.
During first-quarter 2020, Crestwood’s Jackalope system in Powder River basin averaged gathering volumes of 154 MMcfd and processing volumes of 141 MMcfd, increases of 17% and 22%, respectively, from first-quarter 2019. Crestwood connected 11 wells to the Jackalope system during the quarter, primarily targeting Turner and Niobrara formations. For second-quarter 2020, Crestwood anticipates producers will shut-in a portion of wells, resulting in quarter-over-quarter volumetric decreases. For the remainder of 2020, Crestwood anticipates a minimal number of new wells to be connected to the Jackalope system.
Crestwood invested $51.3 million in Powder River basin during first-quarter 2020, primarily on completion of the 200-MMcfd Bucking Horse II processing plant in Converse County, Wyo., which began construction early-2019 and was placed in-service first-quarter 2020 (OGJ Online, Mar. 4, 2020). Crestwood continues to work with other producers and midstream providers in the region to consolidate volumes from third-party processing plants to reduce operating costs, provide better recoveries, and improve netbacks for producers in the current environment.
During first-quarter 2020, Crestwood’s Delaware basin natural gas gathering assets averaged volumes of 231 MMcfd, a 31% increase compared to 176 MMcfd in first-quarter 2019. The increase in gathering volumes in Delaware basin was driven by Royal Dutch Shell’s five-rig development program on the Nautilus gathering system and continued drilling activity by producers on the Willow Lake gathering system. There were 24 wells connected to Crestwood’s Delaware basin gathering systems in the first quarter. The company estimates about 40 well connections for balance-2020. Consistent with other crude oil basins, Crestwood expects some of its producers, primarily those on the Willow Lake system, to shut-in production in the second quarter resulting in lower volumes net to Crestwood.