January 29, 2019 Read More →

Bernstein analysts say Mountain Valley, Atlantic Coast pipeline projects may not get finished

S&P Global Market Intelligence ($):

Even with 10 Bcf/d of new pipeline capacity added in the past 15 months, Appalachia’s pipeline buildout may be finished, putting the completion of late comers such as the EQM Midstream Partners LP-led Mountain Valley Pipeline LLC project and the Dominion Energy Inc.-led Atlantic Coast Pipeline LLC project in doubt, analysts at the investment management company Sanford C. Bernstein & Co. LLC told clients Jan. 24.

“We had anticipated that building through [North Carolina and Virginia] would be difficult,” Bernstein’s midstream analyst Jean Ann Salisbury said in a research note. “The perfect combo of no major recent new pipelines and no state upstream benefit usually leads to problems —just ask [Williams Cos. Inc.’s Constitution Pipeline Co. LLC].”

The costs of the 2-Bcf/d Mountain Valley pipeline and the 1.5-Bcf/d Atlantic Coast pipeline have grown to $4.6 billion and $7 billion, respectively, Bernstein said. These increases may force the operators to charge too high a tariff and make them uncompetitive, according to the firm.

“This translates to $1.30-$2.60/MMBtu, almost certainly more than the cost differential to source from another basin,” Bernstein said. “To us this suggests that we are nearing the end of the buildout period, and even that possibly only one of these projects will ultimately get done.”

Bernstein said that while producers in the dry gas portion of the Marcellus and Utica shales in northeast Pennsylvania will begin to bump up against a cap on takeaway capacity sometime this year, producers in the southwest portions of Appalachia have lots of running room.

With capacity currently available out of both Appalachian regions, producers can look forward to better price realizations, Bernstein said, which is good for companies such as Cabot Oil & Gas Corp., Range Resources Corp. and Southwestern Energy Co. However, Bernstein said, there is a danger that the more Marcellus gas is on the national market, the further national prices will fall.

More ($): Appalachian pipeline buildout looks to be ending, Bernstein analyst says

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