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Which bank?

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Don't know yet. Just heard they will be using one.

Enlink won't be going bankrupt anytime soon, but I will bet anyone on this thread that there will be an MLP in bankruptcy before this carnage is over. The midstream sector will not get away unscathed, that much I can promise you...

One of the more frustrating things I keep hearing is how "insulated" the midstream guys are. No one is immune to this.

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One of the more frustrating things I keep hearing is how "insulated" the midstream guys are. No one is immune to this.

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Unfortunately, a lot of midstream is insulated in that they have price protection (and sometimes guaranteed deliveries) for the next few years. Of course, they either don't care or don't realize that they are contributing to stifling new production coming online.

https://rbnenergy.com/changing-horses-in-midstream-master-limited-partnerships-ongoing-challenges

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One of the more frustrating things I keep hearing is how "insulated" the midstream guys are. No one is immune to this.

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Unfortunately, a lot of midstream is insulated in that they have price protection (and sometimes guaranteed deliveries) for the next few years. Of course, they either don't care or don't realize that they are contributing to stifling new production coming online.

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You realize the only way the midstream guys are able to pay for the infrastructure they built the last 5 years is through long term fixed fee volume committed contracts right? And in 2018 and 2019 when these long term contracts end, the producers are going to have huge leverage due to overbuilt infrastructure. Producers signed the contracts and if they want to get out of the contracts, they need to offer the midstream guy something in return. In many cases I have seen midstream companies agree to amend contracts when given appropriate incentive. If a G&P deal is set up where the producer is paying $0.50/mmbtu to the midstreamer on 50,000 MMBTU/d volume commitment, maybe you offer to increase it to 60,000 MMBTU in exchange for a lower rate? Or maybe you offer to convert the $0.50 to a percent of proceeds deal that is worth less in todays market but worth more to the midstreamer if gas and NGL prices rebound?

Sorry, just can't believe someone would blame a midstream company who is trying to earn a return on its investment and simply collecting proceeds that have been contractually agreed to as the reason producers aren't bringing on more volume. How about oil is $30 and gas is $2? You think that might have something to do with it? Or maybe the fact that supply is greater than demand, maybe that has something to do with it?

My concern with midstream is that they can't enforce their contracts. I know a large oilfield service company that had hundreds of millions in take or pay contracts that they can't/won't enforce. That company's debt was underwritten based on the strengths of those contracts. Unfortunately, the other side of the contract can't live up to their end of the deal.

The same could very likely happen to midstream companies. "Sure...we've got a contract, but I can't pay you anymore..."

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America's best days are definitely behind us!

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It's easy to fall into this trap as we age and it seems like every generation does it.

I personally don't believe it for a second.

Enlink meeting basically stated it is bad out there (which we all know) but we are one of the best midstream companies out there from a financial standpoint. Yes. We are not immune but unless this goes on well into 2017 we will make it just fine.

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My concern with midstream is that they can't enforce their contracts. I know a large oilfield service company that had hundreds of millions in take or pay contracts that they can't/won't enforce. That company's debt was underwritten based on the strengths of those contracts. Unfortunately, the other side of the contract can't live up to their end of the deal.

The same could very likely happen to midstream companies. "Sure...we've got a contract, but I can't pay you anymore..."

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Midstream contracts are far more enforceable than service company contracts. I suppose a service company may have the ability to put liens on the upstream company's assets, but a midstream company can simply shut in the producer and stop providing services. Now, in a bankruptcy, sure a producer can reject the contract, but in many cases they need the services provided under the contract and in a lot of cases they are back at the table negotiating with that same midstream company because no one else has the assets to provide the same services.

I agree, but if they don't have the cash to pay the bills, how much can they negotiate?

I would say there are 2 typical ways a midstream company protects itself:

1. Netting (meaning if they buy the gas or liquids, they net their fees out before paying the producer for their gas. This puts the exposure on the producer for not getting paid)

2. Letter of credit requirement --- by keeping 2 months worth of fees under an LC, the midstream company can shut in the producers gas prior to having any exposure. Obviously this doesn't help continue getting paid, but if the producer can't pay its midstream company and gets shut in as a result, they will file bankruptcy shortly and once in bankruptcy, the midstream company can begin providing services again as post petition claims have super priority

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One of the more frustrating things I keep hearing is how "insulated" the midstream guys are. No one is immune to this.

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Unfortunately, a lot of midstream is insulated in that they have price protection (and sometimes guaranteed deliveries) for the next few years. Of course, they either don't care or don't realize that they are contributing to stifling new production coming online.

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You realize the only way the midstream guys are able to pay for the infrastructure they built the last 5 years is through long term fixed fee volume committed contracts right? And in 2018 and 2019 when these long term contracts end, the producers are going to have huge leverage due to overbuilt infrastructure. Producers signed the contracts and if they want to get out of the contracts, they need to offer the midstream guy something in return. In many cases I have seen midstream companies agree to amend contracts when given appropriate incentive. If a G&P deal is set up where the producer is paying $0.50/mmbtu to the midstreamer on 50,000 MMBTU/d volume commitment, maybe you offer to increase it to 60,000 MMBTU in exchange for a lower rate? Or maybe you offer to convert the $0.50 to a percent of proceeds deal that is worth less in todays market but worth more to the midstreamer if gas and NGL prices rebound?

Sorry, just can't believe someone would blame a midstream company who is trying to earn a return on its investment and simply collecting proceeds that have been contractually agreed to as the reason producers aren't bringing on more volume. How about oil is $30 and gas is $2? You think that might have something to do with it? Or maybe the fact that supply is greater than demand, maybe that has something to do with it?

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I probably should have specified. I am not saying the midstream companies should be giving handouts. However, we have midstream companies asking to renegotiate contracts for longer terms, with more dedicated gas, on commercial terms that are undeniably worse for us. It appears to me that this specific unit of a large midstream company is trying to maintain absolute revenue in the face of declining production by increasing the cost to transport despite the current price environment. Of course, we just tell them no, but the same guy will be asking in a month or two. Maybe it isn't like that everywhere.

I am sorry if my previous statement came across to you as the E&P guys should get something for nothing - I do think it should be along the lines of increased production for a slightly lower fee, but that is just my opinion.

I agree that they have some protection. My concern is if the producers BK, and the midstream company is heavily leveraged for infrastructure expansion. That's a recipe for disaster.

Hoping that we don't see that, but won't be surprised if it happens.

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I would say there are 2 typical ways a midstream company protects itself:

1. Netting (meaning if they buy the gas or liquids, they net their fees out before paying the producer for their gas. This puts the exposure on the producer for not getting paid)

2. Letter of credit requirement --- by keeping 2 months worth of fees under an LC, the midstream company can shut in the producers gas prior to having any exposure. Obviously this doesn't help continue getting paid, but if the producer can't pay its midstream company and gets shut in as a result, they will file bankruptcy shortly and once in bankruptcy, the midstream company can begin providing services again as post petition claims have super priority

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2. is big right now. I'm know that our credit group is working basically 24/7 these days on any sort of new deals marketing brings them to make sure they're credit worthy.

OPEC is going to save us. I love the free market!

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OPEC is going to save us. I love the free market!

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OPEC is going to save us. I love the free market!

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Maybe this?

Oil rose above $32 a barrel on Tuesday, lifted by hopes that OPEC and non-OPEC producers may be edging closer to a deal to tackle one of the biggest supply gluts in decades.

Prices begin to go up. OPEC and non-OPEC members want to catch the rising profits. Production ramps up. Rinse and repeat cycle...

we still haven't hit refinery turn around season. there's still major downside risk to the Mar/Apr contracts.

New org chart just released. Going to lose a lot of really good folks who aren't ready to hang it up just yet. Not sure if I'm safe, but confidence has decreased significantly from a week ago.

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New org chart just released. Going to lose a lot of really good folks who aren't ready to hang it up just yet. Not sure if I'm safe, but confidence has decreased significantly from a week ago.

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Sorry to hear that. Hope things work out for you. This isn't going to be a fun year.

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New org chart just released. Going to lose a lot of really good folks who aren't ready to hang it up just yet. Not sure if I'm safe, but confidence has decreased significantly from a week ago.

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Probably lose some people that should have hung it up years ago, too. I know we have plenty of those lingering around my place.

No doubt, but we're losing a percentage that dictates the loss of good performers as well.

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New org chart just released. Going to lose a lot of really good folks who aren't ready to hang it up just yet. Not sure if I'm safe, but confidence has decreased significantly from a week ago.

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What company? CVX

Was told this morning I'm safe for our next big round of layoffs and that my bonus will be increased another 50%. Hopefully some motivation to keep your chins up and keep working hard. That's a reputation we Ags have built in the industry and there's always a chance someone will notice and to an extent, that's all you can control.

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One of the more frustrating things I keep hearing is how "insulated" the midstream guys are. No one is immune to this.

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Unfortunately, a lot of midstream is insulated in that they have price protection (and sometimes guaranteed deliveries) for the next few years. Of course, they either don't care or don't realize that they are contributing to stifling new production coming online.

---

You realize the only way the midstream guys are able to pay for the infrastructure they built the last 5 years is through long term fixed fee volume committed contracts right? And in 2018 and 2019 when these long term contracts end, the producers are going to have huge leverage due to overbuilt infrastructure. Producers signed the contracts and if they want to get out of the contracts, they need to offer the midstream guy something in return. In many cases I have seen midstream companies agree to amend contracts when given appropriate incentive. If a G&P deal is set up where the producer is paying $0.50/mmbtu to the midstreamer on 50,000 MMBTU/d volume commitment, maybe you offer to increase it to 60,000 MMBTU in exchange for a lower rate? Or maybe you offer to convert the $0.50 to a percent of proceeds deal that is worth less in todays market but worth more to the midstreamer if gas and NGL prices rebound?

Sorry, just can't believe someone would blame a midstream company who is trying to earn a return on its investment and simply collecting proceeds that have been contractually agreed to as the reason producers aren't bringing on more volume. How about oil is $30 and gas is $2? You think that might have something to do with it? Or maybe the fact that supply is greater than demand, maybe that has something to do with it?

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I probably should have specified. I am not saying the midstream companies should be giving handouts. However, we have midstream companies asking to renegotiate contracts for longer terms, with more dedicated gas, on commercial terms that are undeniably worse for us. It appears to me that this specific unit of a large midstream company is trying to maintain absolute revenue in the face of declining production by increasing the cost to transport despite the current price environment. Of course, we just tell them no, but the same guy will be asking in a month or two. Maybe it isn't like that everywhere.

I am sorry if my previous statement came across to you as the E&P guys should get something for nothing - I do think it should be along the lines of increased production for a slightly lower fee, but that is just my opinion.

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Ah, I see. I am guessing you are referring to Enterprise or Oneok maybe. Most midstream guys I know understand that right now you should be happy with the deals you have and if you want to extend term or add volume then you need to be prepared to offer a discount.

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Was told this morning I'm safe for our next big round of layoffs and that my bonus will be increased another 50%. Hopefully some motivation to keep your chins up and keep working hard. That's a reputation we Ags have built in the industry and there's always a chance someone will notice and to an extent, that's all you can control.

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150% x $0 = $0

Can't confirm/deny, think my posting history on this thread will suffice.

Sorry for the obfuscation ...

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Was told this morning I'm safe for our next big round of layoffs and that my bonus will be increased another 50%. Hopefully some motivation to keep your chins up and keep working hard. That's a reputation we Ags have built in the industry and there's always a chance someone will notice and to an extent, that's all you can control.

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We always prefer raising bonuses 50% immediately prior to firing. We find it give the employee a sense of self worth plus good feelings towards the company. However from a cost containment perspective there is no way we can justify the expense so we just can'em!

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Can't confirm/deny, think my posting history on this thread will suffice.

Sorry for the obfuscation ...

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No worries.

I will be in NOLA next Wednesday with nothing to do. Probably going to find a place to watch all the signing day activities.

Any recommendations? I've heard Mannings is good.

Hypothetically, what price ranges would justify shutting in production on conventional (<10 years old) vs unconventional oil wells? (Taking into account electricity/disposal costs/lease operating exp. etc./diminished well performance)

Anyone going to NAPE?

NBL just lowered their dividend from $0.18 to $0.10 a share. Not sure if any of the larger companies will reduce dividends.