Tuesday, August 11, 2009

Regency Pipeline Update

Regency Energy Partners presented its quarterly earnings yesterday and gave an update on its big Haynesville Shale pipeline project. Bottom line is the project is on budget and maybe even a little ahead of schedule.

Always fun is Regency's map of key Haynesville and Bossier completions. Given the prolific nature of many Haynesville wells and the fact that the regional rig count continues to rise (or at least remain steady), Regency is very excited to get their new project online. Please note that this map is one of the few that delineates the Bossier Shale (in pink).

In reading through Regency's earnings call transcript, I couldn't help but to think about where pipeline companies stand vis-a-vis the expected impact of the 50% decrease in working rigs over the past 12 months. I've mentioned before that pipeline companies are quick to point out in times of decreasing commodity prices that their business is based on volume and throughput, not prices. Given the prolific nature of shale plays, these companies have to be salivating because they get to do their two favorite things: 1) transport lots of gas and 2) build new pipelines. But if the decreasing rig count leads to the expected drop in supply, where does that leave the pipelines? Supplies drop, therefore throughput drops. I guess the storage business stays strong. It should be a temporary problem, but with lots of expensive new pipelines coming online, it has to make for some uneasy times for management and investors.

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