Plains All American Pipeline Buys Velocity Midstream's Eagle Ford Assets

Plains All American Pipeline (PAA) announced plans to acquire Volocity Midstream's - Velocity South Texas Gathering assets.  The pipeline and midstream deal includes over 120 miles of crude oil and condensate pipe with capacity of 150,000 barrels per day through parts of Dimmit, La Salle, and Webb counties. The pipeline system is underpinned by volume commitments from major producers in the area. If warranted, the system can be expanded to handle 185,000 barrels per day. The system also has storage capacity at Catarina and Gardendale. The Gardendale facility ties directly into Plains All American's existing Eagle Ford pipeline.

The deal was part of a larger announcement by PAA that included assets on the East Coast, in the Permian Basin, and in Canada for a total of $620 million. Much of the midstream activity in South Texas to date has been new projects, but we expect more consolidation in the coming months as midstream companies look to gain a true foothold in the area. Infrastructure has been one of the few restricting factors in the play, but major projects are on pace to remedy current concerns over the next couple of years.

The Partnership recently closed the acquisition of 100 percent of the member interests in Velocity South Texas Gathering, LLC ("Velocity") from Velocity Midstream Partners, LLC. The deal includes approximately 120 miles of crude oil and condensate gathering and transportation pipelines currently in advanced stages of construction in the area of South Texas.

The Gardendale storage hub will have access to PAA's Eagle Ford pipeline as well as other transportation alternatives, including third party pipelines, truck and rail. Over the next 18 to 24 months, PAA expects to complete current construction, extend the system to access additional condensate barrels and other crude oil-oriented portions of the major resource play, and increase terminal capacity at Gardendale from 150,000 barrels to 250,000 barrels.

Read the entire news release at paalp.com

Magellan Midstream Expands Houston Ship Channel Pipeline - Eagle Ford Crude

Magellan Midstream plans to expand a Houston area pipeline to expand the company's Eagle Ford crude pipeline capacity. The six mile pipeline will help increase delivery of crude,  being brought into the area from South Texas, into Houston and Texas City refineries.

Magellan Midstream Partners, L.P. (NYSE: MMP) announced today that it is further expanding its crude oil pipeline distribution capabilities in the Houston area to deliver domestic crude oil and condensate transported via third-party pipeline systems from the Eagle Ford Shale production area directly to local refineries. The project includes the construction of a 6-mile, 24-inch diameter crude oil pipeline between the pipeline interchanges of Genoa Junction and Speed Junction, which will connect to the 24-inch diameter crude oil pipeline along the Houston Ship Channel that was previously announced as part of the partnership’s Houston-to-El Paso pipeline reversal project, allowing Magellan to further distribute product to the Houston-area refineries.

“Magellan’s crude oil infrastructure is strategically positioned to be the last leg distribution conduit to the Houston and Texas City refinery gate for growing domestic crude oil and condensate production,” said Michael Mears, chief executive officer.

Copano Energy's Margins Grow With Eagle Ford Volumes

Copano Energy's margins are growing as the company expands its footprint in the Eagle Ford Shale. Higher NGL prices along with increased throughput are the primary drivers for the increase. Copano Energy is one of the most active midstream companies in the Eagle Ford Shale. The company operates assets and owns a 50% interest in an Eagle Ford Gathering Joint Venture with Kinder Morgan. In total, the company has plans to invest more than $500 million in more than 1 Bcf/d of pipeline and processing capacity. 

"We are making significant progress on our Eagle Ford Shale strategy as we complete and integrate the bulk of our 2011 projects, several of which have begun accepting volumes on a limited basis.

"We continue to see strong producer activity in the Eagle Ford Shale and when these projects are placed into full-service, they will have an immediate and positive impact on our distributable cash flow and distribution coverage," Northcutt added.

The year-over-year increase resulted primarily from (i) a 9% increase in realized margins on service throughput compared to the third quarter of 2010 ($0.63 per MMBtu in 2011 compared to $0.58 per MMBtu in 2010) reflecting higher NGL prices and (ii) an increase in pipeline throughput associated with fee-based contracts in the Eagle Ford Shale and the north Barnett Shale Combo plays. During the third quarter of 2011, throughput volumes for the Eagle Ford Shale and the north Barnett Shale Combo plays increased 25% and 41%, respectively, from the second quarter of 2011. During the third quarter of 2011, weighted-average NGL prices on the Mont Belvieu index, based on Copano's product mix for the period, were $59.43 per barrel compared to $40.16 per barrel during the third quarter of 2010, an increase of 48%. During the third quarter of 2011, natural gas prices on the Houston Ship Channel index averaged $4.23 per MMBtu compared to $4.33 per MMBtu during the third quarter of 2010, a decrease of 2%.

During the third quarter of 2011, the Texas segment provided gathering, transportation and processing services for an average of 765,744 MMBtu/d of natural gas compared to 590,116 MMBtu/d for the third quarter of 2010, an increase of 30%. The Texas segment gathered an average of 463,321 MMBtu/d of natural gas during the third quarter of 2011, an increase of 45% over last year's third quarter, primarily due to increased volumes from the Eagle Ford Shale and north Barnett Shale Combo plays.

Read the entire press release at copanoenergy.com

Eminent Domain Might Be Losing Power in Texas

Eminent domain in Texas might be redefined if a recent court ruling is upheld by higher courts. The court considered the remainder value of the Donnell's family lands in McMullen County, TX and not the pipeline right-of-way alone. The decision required the Eagle Ford pipeline company to compensate the family for depreciation of all lands.  That includes land not directly impacted by the pipeline. The family successfully argued that the land lost value due to its proximity to the pipeline. Essentially, they argued more than just the right-of-way was affected by the pipeline and additional compensation should be required. The pipeline company has been ordered to pay the family $600,000, but the decision will be challenged in higher courts before we get a final decision.

The question wasn't whether LaSalle Pipeline LP — which has the right of eminent domain — could lay a 16-inch, 52-mile pipeline that would cross two tracts of McMullen County land owned by Donnell Lands LP, a family partnership.

The biggest issue was whether the value of the rest of the ranchland would be affected by the pipeline's presence.

The company said no. But the landowners said yes, and a trial jury agreed with them to the tune of more than $600,000.

That decision has been winding its way through the Texas court system, and along with some legislative changes that went into effect in September, could represent a small step in giving landowners a larger voice in eminent domain battles.

Read more at mysanantonio.com

Rosetta Resources Planning 65-Acre Spacing - Expanding Gathering

Rosetta Resources is planning to down space to 65-acres per well in the Eagle Ford. That's a nice jump from the 100+ acres spacing most are utilizing across the play. Well results will tell the story, but Rosetta has the confidence to go forward based on what it has seen to date. Development of the company's entire acreage position is expected at a range of 60-80 acres per well. The company also proved the potential of 13,600 acres outside of Gates Ranch. At ~65-acre spacing, that's an additional 200 drilling locations. In addition, Rosetta has a 10,000 acre position that will be tested during 2012.

12 Eagle Ford wells were completed in the third quarter and the company plans to complete 13 wells in the fourth quarter. That pace is close to the long-term target of 60 completions per year. With an inventory of more than 800 wells to be drilled, the Eagle Ford is becoming a 10-15 year development for Rosetta Resources. 

Our Eagle Ford position continues to drive the success of our company as we expand our operations into new parts of the play that will serve as a further catalyst for growth,..

Progressed midstream expansions — Rosetta is benefiting from improved performance by Eagle Ford midstream providers. Recent expansions that became operational in October almost three weeks ahead of schedule increased total firm gross wet gas capacity for the Eagle Ford to 123 million cubic feet per day ("MMcf/d"). This will allow the Company to move 166 million cubic feet equivalent per day ("MMcfe/d") of net Eagle Ford volumes on a firm basis. Firm gross wet gas capacity of 160 MMcf/d will become available in January 2012 increasing Rosetta's net total firm capacity to 216 MMcfe/d.

Rosetta successfully completed 12 Eagle Ford wells during the quarter ended September 30, 2011. As of September 30, 2011, the Company has completed 52 horizontal wells. During the third quarter, Rosetta operated three to four rigs in the Eagle Ford area. Rosetta is the operator and holds a 100 percent working interest in the following three wells drilled in new areas outside of Gates Ranch:

• The Briscoe Ranch 1H well is located north of Gates Ranch in a 3,500-acre section of Rosetta's leasehold in the condensate window in Dimmit County. The well was completed with a 5,500-foot lateral and 15 frac stages and brought on-line on October 26, 2011. The well tested at a gross stabilized rate of 850 Bbl/d of oil, 3.9 MMcf/d of residue gas, 490 Bbl/d of NGLs.

• The Vivion 1H well is located in central Dimmit County in the oil window on an 8,100-acre tract. The well was completed with a 5,600-foot lateral and 15 frac stages and brought on-line on September 14, 2011. The well tested at a gross stabilized rate of 506 Bbl/d of oil, 436 Mcf/d of residue gas, 102 Bbl/d of NGLs.

• The Klotzman #1 well is located on 1,900 acres in DeWitt County in the oil window. The well was completed with a 5,100-foot lateral and 15 frac stages and brought on-line on November 1, 2011. The well tested at a gross stabilized rate of 2,450 Bbl/d of oil, 2.0 MMcf/d of residue gas, 250 Bbl/d of NGLs.

Rosetta plans to complete 13 Eagle Ford wells during the fourth quarter and continue to operate four rigs in the area.

As Rosetta moves forward with the delineation, development, and down-spacing of its Eagle Ford leasehold, the total inventory portfolio in the area has grown 45 percent to 2.7 Tcfe compared to year-end 2010.  At a targeted pace of approximately 60 completions per year, Rosetta expects to develop its current Eagle Ford inventory over the next 10 to 15 years.