Calculating How Fast New Permian Gas Takeaway Might Fill; OW Key Beneficiaries TRGP & KNTK, EW OKE (Less Exposed)

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Calculating How Fast New Permian Gas Takeaway Might Fill; OW Key Beneficiaries TRGP & KNTK, EW OKE (Less Exposed)

ssociated Gas Production - Forecast

Source: Morgan Stanley Research.

Basin growth has already started to resume with completion of the GCX

expansion. July month-to-date residue gas production (net of NGL shrink) has

averaged 24.646 Bcf/d, according to S&P Global | Platts, establishing a new monthly

record (production set a new daily high of 25.104 Bcf/d in July 12). Production had

remained relatively flat in June at about 23.8 Bcf/d, just below the previous monthly

record of 24.1 Bcf/d established in March. Measuring the 30-day average and against

the formal in-service date of the GCX expansion, basin production has grown 0.6-1.1

Bcf/d. With the GCX expansion now running fully utilized according to KMI (in part a

redirection of flows from other pipelines), we believe the recent incremental

production has been absorbed in part by the recent absence of pipeline maintenance

events and also in part by in-basin demand (power, industrial, residential/

commercial) that fluctuates seasonally and generally trends between 400 and 700

MMcf/d (note as well that fuel and pipeline loss account for another 1.2-1.4 Bcf/d).

With Waha prices still positive, however, available egress exists for the moment.

• Improved takeaway capacity has supported a significant recovery in

regional gas prices. At the Waha Hub, spot prices turned positive on June 15

for the first time since February 3 as the GCX expansion entered its

commissioning phase. Since June 15, Waha spot prices have averaged $1.52/

MMBtu, with a high of $2.45/MMBtu on July 22. The rebound follows an

extended period of severe price weakness, during which Waha traded at