Consolidation among Permian Basin oil and gas operators has had an impact on drilling activity, in turn impacting production volumes for midstream companies.
“We’ve seen a huge increase in drilling activity on our acreage. We have 11 rigs on our system,” Drew Ward, partner and chief commercial officer, reported.
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Speaking with the Reporter-Telegram by telephone, Ward explained the Midland Basin, where Pinnacle’s Dos Picos system operators, has “a ton of inventory and running room for our customers. It’s great for us to expand.”
He continued, “the area we serve and the producers we serve have the best, most coveted acreage. The proof is in turning acreage over to the big guys to develop for the long-term.”
Since Pinnacle was founded in 2019, he said, “We’ve had an almost complete turnover in customers. It’s been great for us – we’ve had great customers and high-graded our customers.”
That substantial uptick in activity has helped Pinnacle underwrite Phase II expansion of Dos Picos, adding compressor stations and a second processing train, according to Ward. When the second phase is fully online, he said it will have 440 million cubic feet in processing and compressing capacity.
“If you look back 24 months, natural gas takeaway was hindered by pinch points; near-term, that’s been alleviated by compressor station expansion so there are no pinch points. We contract our business to take care of those pinch points,” Ward said.
There is a shortage of takeaway capacity for natural gas liquids, he said, with projects underway to alleviate that shortage set to enter service next year.
“Midstream is being more thoughtful in how it spends capital and expands,” Ward said. “You won’t see huge speculative expansion. Producers and midstream companies are being more thoughtful in how they plan for expansion.”
As part of that, he said Pinnacle is being asked to help its customers with planning for volumes, which in turn helps the company plan its capital expenditures.
Pinnacle, Ward said, will grow as needed and is always looking for opportunities around its footprint to grow its asset base.
“Our focus right now is the Midland Basin. As we mature, I tell people about our franchise through relationships and opportunities. We will look to expand where it makes sense; if that means another basin, we’re happy to expand there. We’re always looking for what’s next,” he said.
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