Crude Price Drops, but Pipelines Projects Flow

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Many have been panicked by the drastic drop in crude-oil prices during the last two months, leading to questions of "What's next?" As visions of 1929 Wall Street flash before some people's eyes as they see all oil-related investments crumbling, industry professionals are, by and large, unmoved--and in some cases optimistic.

Although producers and drillers have been hit hard, as shown by several rounds of layoffs at various drilling companies since November, midstream companies that build and operate the pipelines that carry oil from drilled wells to their markets are continuing apace. While large and small companies have different reasons for being so, most midstream companies are left unaffected by the price drop and are moving ahead as planned, delayed only by factors that would delay a project under normal circumstances.

Larger midstream companies have proven themselves to be cash-rich. A prime example is Kinder Morgan Incorporated (NYSE:KMI) (Houston), which recently purchased Hiland Partners (Enid, Oklahoma) for $3 billion, giving Kinder Morgan its first, sizable footprint in the Bakken Shale. This cash bubble allows large midstream companies to pursue their planned projects without as much reliance on bank loans, which have been harder to obtain as prices have fallen. Companies in this category, such as TransCanada Corporation (NYSE:TRP) (Calgary, Alberta), are facing delays such as permitting and lawsuits, as exemplified by the further-delayed Keystone XL project, which is still awaiting U.S. federal approval to begin construction.

Smaller midstream companies, likewise, are maintaining a positive outlook and are continuing with their projects. Due to the smaller scope of these companies' projects, the size of the investments required is smaller, making external financing easier. Similarly, the demand for such projects in some regions, especially the Bakken Shale, remains high as infrastructure tries to catch up with the existing drilled capacity. This extends to the natural gas and natural gas liquids pipeline industries as well, due to the mixed nature of hydrocarbons being extracted from the Bakken play.

Gathering pipeline systems allow producers to keep prices low, saving refiners money and making producers more competitive.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.