Updated November 5, 2024
Price
November 5, 2024 - December Waha basis trades around $-1.40/MMBtu after the November contract has expired at $-3.178/MMBtu. Prices fell as low as -$3/MMBtu in late August as the gas production in the Permian hit a new record high while El Paso pipeline maintenance limited flow capacity. Waha cash prices found support after Permian Resources announced that the Matterhorn pipeline has started moving small gas volumes. Modest weather in continues to weigh on prices, and a relatively warm November forecast is adding more bearish pressure.
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Recent News:
For more archived news related to the Permian Basin, Click Here |
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Permian Basin Gas Overview
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The Permian covers an area about 250 miles wide and 300 miles long, an immense 75,000 square miles. The greater Permian Basin accounts for nearly 40 percent of all oil production in the U.S. and nearly 15 percent of its natural gas production, according to the Federal Reserve Bank of Dallas. |
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Rig Count |
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Active rigs in the Permian made a steep recovery in 2022 versus the Covid-19-induced lows in 2020. As commodity prices have risen, the Permian has been the preferred basin for deploying drilling rigs. Recently, rigs have neared 303. |
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Permian Rig count from Baker Hughes
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Total production growth: According to PointLogic, modeled dry gas production for the Permian Basin averaged around 18 Bcf for 2023 and about 19.9 Bcf/d from July to September. Furthermore, Permian production is forecasted to grow by 5.2 Bcf/d to 24.1 Bcf/d from 2023 through 2029, according to S&P Global. |
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Expectation of constraints. Lower basis prices, or large discounts to Henry Hub, usually imply some sort of egress capacity constraint or increased need for capacity out of the basin. WhiteWater announced on May 2 that the Whistler Pipeline would be expanded to 2.5 Bcf/d, an increase of 0.5 Bcf/d. Whistler pipeline has gained the final investment decision (FID) and was operational starting in September 2023. Interstate receipts from Whistler climbed from below 800 MMcf/d to over 1 Bcf/d in October. Because the Whistler pipeline, which travels from West Texas to Agua Dulce, TX, is an intrastate pipeline that makes it difficult to assess real-time gas flows. Kinder Morgan announced a final investment decision (FID) on its Permian Highway Pipeline expansion on June 29, 2022. The project involves adding compressors on PHP to increase the pipeline's capacity by 550 MMcf/d. Kinder Morgan brought the expansion into service on Dec.1, 2023. Kinder Morgan announced the start of an open season for the Gulf Coast Express expansion on May 16, 2022. The project entails adding compressors to the GCX pipeline to enhance its capacity from the Permian Basin to South Texas markets by 570 MMcf/d. The project is expected to be operational in May 2026, subject to additional customer agreements. WhiteWater announced a final investment decision (FID) on its Matterhorn Express Pipeline on Thursday, May 19, 2022. It will transport 2.5 Bcf/d of natural gas from West Texas' Permian Basin to Houston's Katy area. The 490-mile is expected to be in service in September 2024. Energy Transfer proposed their new Warrior pipeline. "Given the proposed route and our ability to utilize existing assets, we believe we could complete construction of (the Warrior) project in two years or less once we have reached FID (final investment decision)," said Energy Transfer's CFO Thomas Long on an earnings call on May 4. On August 8, Co-CEO Mackie McRea said Energy Transfer is progressing towards a FID on the Warrior Pipeline in the 2H 2024, unaffected by the recent FID on the Blackcomb PipelineAnalysts estimate the project to add around 1.5 Bcf/d of transport capacity with about 260 miles of new pipe from the Permian Basin to the Dallas area. The estimated in-service date is 4Q2026. Kinder Morgan reportedly plans another Permian project, the Permian Pass Pipeline. Analysts estimate the pipeline's capacity to be around 2 Bcf/d, and it would transport gas from the Permian basin to Katy, Texas. If KMI goes ahead with the project, it is expected to come online sometime around 4Q2025. The Apex Pipeline is a proposed 563-mile pipeline with a capacity of 2 Bcf/d. It is intended to terminate near Port Arthur, Texas. In March 2023, Targa received approval from the Texas Railroad Commission for the project’s line. Despite this approval, company executives have publicly stated that they are still in the decision-making process regarding whether to proceed with the project. The DeLa Express project was made public in April when Moss Lake Partners, a private company, filed preliminary paperwork with the FERC. This proposed 690-mile pipeline is designed to have a capacity of 2 Bcf/d. Unique among the projects, it is the only pipeline that would cross state lines, with its terminal point planned for Cameron Parish, Louisiana. Additionally, it is designed specifically to transport liquids-rich gas, allowing shippers to bypass processing in West Texas before shipping. According to Moss Lake Partners' filings with the FERC, the projected start date for the DeLa Express project is 2028.
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Producers hedging: When producers hedge with swaps, they take a short position – they sell swaps. These hedges are almost always placed with trading counterparties or swap dealers. These positions eventually appear on the exchanges as the counterparties place offsetting positions to lay off their risk. Hedging considerations Waha basis can be hedged with swaps. Waha is usually hedged as part of a complete natural gas hedge. The general recommendation is to hedge NYMEX Henry Hub natural gas and Waha basis in two steps but simultaneously. Contact us at info@aegis-hedging.com if you need to work through the details. |
