DCP Midstream Benefits from Eagle Ford, DJ Basin Assets in 2014, Puts 2015 Growth Capex at $300 Million

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Researched by Industrial Info Resources (Sugar Land)--DCP Midstream Partners LP (NYSE:DPM) (Denver, Colorado), a midstream master limited partnership in the natural gas and natural gas liquids (NGL) gathering, transportation and storage markets, reported solid profit and revenue gains in 2014. Strong volume growth, particularly at new plants in the Eagle Ford Shale and in the Denver-Julesberg Basin, and the first full year of contributions from two major pipelines drove the results. Net income attributable to the partners was reported to be $423 million, compared with $200 million in 2013.

Industrial Info is tracking $2.9 billion in projects involving DCP, including the $250 million construction of a natural gas-processing plant in Hamilton, Michigan. The planned two-train plant is designed to process 180 million standard cubic feet per day of natural gas from an existing pipeline; it is currently slated to wrap up in the fourth quarter of 2016. Industrial Info also is tracking the $255 million construction of a cryogenic gas-processing plant in Orca, Texas, which is designed to have an inlet capacity of 200 million standard cubic feet per day of natural gas, and mixed NGL production of 30,000 barrels per day, sourced from the Permian Basin; it is currently set to be completed in mid-2017.

Sales of natural gas, propane, NGLs and condensate totaled $3.14 billion in 2014, a 13.75% increase from 2013. The most significant drivers were in the Natural Gas Services segment, which saw stronger volumes and NGL recoveries in the company's Eagle Ford system, and stronger volumes and revenues from its O'Connor plant in the Denver-Julesberg Basin and its Discovery joint venture in the deepwater Gulf of Mexico. Earlier this month, the Keathley Canyon deepwater gas-gathering system was placed into service at Discovery, with a capacity of more than 400 million cubic feet per day. DPM owns a 40% interest in Discovery, and operator Williams Partners LP (NYSE:WPZ) (Tulsa, Oklahoma) owns 60%.

DCP's NGL Logistics segment also fared well, with higher volumes from the Front Range Pipeline, which runs from Weld County, Colorado, to Skellytown, Texas; and the Texas Express Pipeline, which runs from Skellytown and Carson County, Texas, to Mont Belvieu, Texas. The segment also saw its first full year of contributions from the Southern Hills Pipeline, which runs from the Midcontinent to the Texas Gulf Coast and Mont Belvieu; and the Sand Hills Pipeline, which runs from the Permian and Eagle Ford shales to Mont Belvieu.

"We have over $300 million of approved projects for 2015, all of which are predominantly fee-based in nature," said Bill Waldheim, the president of DCP, in a conference call. "Due to uncertainty around our producers' capital budgets, we plan to prudently manage our capital spend, while watching their drilling programs, so we do not get ahead of them. We'll remain flexible, preparing for future opportunities around our footprint, like securing new plant permits and ordering long lead-time equipment, so we can quickly ramp up if and when needed."

Growth capital expenditures in 2015 are expected to total more than $300 million, while maintenance capital expenditures are expected to total between $50 million $60 million.

Following on the its success in the Denver-Julesberg Basin, DCP is planning the Grand Parkway gathering project, a fee-based, low-pressure gathering system project in the basin. The $55 million project, which is backed by producer commitments, will increase volumes and improve the system's reliability by lowering field pressure. It is expected to be in service by the end of the year.

"Earnings from the joint venture, and incremental capacity, are expected to commence in the first quarter of 2016," Waldheim said in the conference call. "This fee-based project supports continued production growth in East Texas, and benefits DCP's extensive gathering and processing infrastructure around our East Texas system."

Earlier this year, DCP agreed to a joint venture with Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas), Anadarko Petroleum Corporation (NYSE:APC) (Houston) and MarkWest Energy Partners LP (NYSE:MWE) (Denver, Colorado) in the Panola Pipeline, a 181-mile NGL pipeline that would run from Carthage to Mont Belvieu, Texas. The planned expansion project involves the installation of 60 miles of pipeline, as well as pumps and related equipment, to double capacity to about 100,000 BBL/d. Enterprise would be the operator with 55% ownership, with the remaining 45% interest divided evenly among DCP, Anadarko and MarkWest.

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.