Headlines

February 17, 2010
ONEOK Signs 10-Year NGL Fractionation Agreement With TARGA

ONEOK Partners LP announced Tuesday that it has signed a definitive 10- year firm space fractionation agreement with Cedar Bayou Fractionators LP, a majority-owned subsidiary of Targa Resources Partners LP, for fractionation services at the subsidiary's natural gas liquids fractionation facility at Mont Belvieu, Texas.
  
Under terms of the agreement, ONEOK Partners has contracted for 60,000 barrels per day of fractionation services at the Cedar Bayou Fractionators LP facility, which is currently being expanded to 275,000 barrels per day from 215,000 per day and is expected to be operational during the second quarter of 2011. OPIS originally reported the announcement of the intention to sign the agreement in late
December 2009.
  
As part of the expansion, Targa and ONEOK plan to construct interconnection
facilities to link the Cedar Bayou Fractionators LP fractionation facility with ONEOK Partners' recently completed Arbuckle Pipeline, a 440-mile raw NGL pipeline extending from southern Oklahoma through the Barnett Shale of north Texas and on to ONEOK Partners' fractionation and storage facilities at Mont Belvieu.
        

February 2, 2010
Enterprise Says Record Pipeline Volumes Support Strong 2009 Earnings

Record pipeline volumes for natural gas liquids, crude oil, refined products and petrochemical products were a key factor behind the strong earnings Enterprise reported in the fourth quarter of 2009.
  
Liquids volumes hit 4.3 million bbl/day, while natural gas pipeline volumes hit 11.5 trillion BTUs/day. Those represented an increase of 15% and 2% over the same quarter in 2008, Enterprise said in a statement released today.
  
Growth in NGL, crude oil, refined products and petrochemical pipeline volumes was primarily attributable to the Shenzi, Cameron Highway and Poseidon crude oil pipelines; the Mid-America and Seminole pipelines; and the NGL import/export terminal on the Houston Ship Channel and its associated pipeline. NGL fractionation volumes for the fourth quarter of 2009 increased 5% to 477,000 barrels per day ("MBPD"). Equity NGL production for the fourth quarter of 2009 was a record
120 MBPD.
  
For the fourth quarter of 2009, Enterprise reported a gross operating margin of $865 million. Net income for the quarter was $406 million, or $0.60 per unit. That was up from net income of $228 million for the same quarter in 2008. Net income for the fourth quarter of 2009 included the benefit of $24 million, or $0.04 per unit, related to the settlement of a rate case for the Mid-America pipeline; $16 million, or $0.03 per unit, of proceeds received from insurance associated with the effects of hurricanes Ike and Katrina; and $9 million, or $0.01 per unit, for insurance proceeds associated with the repairs of the flex joint on the Independence Trail pipeline in 2008.
  
For 2009, Enterprise reported record gross operating margin and net income attributable to Enterprise of $2.8 billion and $1.0 billion, respectively.
Earnings per unit for 2009 were $1.73 per unit.
  
Enterprise made $517 million of capital investments during the fourth quarter of 2009, including $58 million of sustaining capital expenditures. For 2009, Enterprise made $1.7 billion of capital investments, including $184 million of sustaining capital expenditures.
  
Gross operating margin for the NGL Pipelines & Services segment increased 44% to $511 million for the fourth quarter of 2009 compared to $354 million for the same quarter of 2008.
  
Enterprise's natural gas processing business recorded a $96 million increase in gross operating margin to $299 million for the fourth quarter of 2009 from $203 million for the fourth quarter of 2008. The partnership's Louisiana, Rocky Mountain and Texas natural gas processing plants accounted for approximately $63 million of this increase generally as a result of an increase in equity NGL production and higher processing margins. NGL marketing activities contributed $43 million of the increase in gross operating margin for this business primarily due to recognition of earnings associated with forward sales transactions that were settled during the fourth quarter of 2009.
  
Equity NGL production (the NGLs that Enterprise earns as a result of providing processing services) for the fourth quarter of 2009 increased to a record 120 MBPD compared to 108 MBPD in the fourth quarter of 2008. This increase in equity NGL production was due to a 12-MBPD increase in volumes from the partnership's Rocky Mountain plants and a 6-MBPD increase in volumes from its South Louisiana plants compared to the fourth quarter of 2008, when certain Louisiana plants were impacted by volume disruptions caused by the effects of hurricanes Gustav and Ike. Enterprise reported fee-based processing volumes of over 2.5 billion cubic feet per day for the fourth quarter of 2009 compared to 2.7 billion cubic feet per day for the fourth quarter of 2008, primarily reflecting a decrease in fee-based processing volumes at plants in South Texas.
  
Gross operating margin from the partnership's NGL pipeline and storage business increased by 44% to $176 million in the fourth quarter of 2009 from $122 million in the fourth quarter of 2008. This $54-million increase in gross operating margin was primarily due to a $26-million benefit related to the settlement of the rate case for Mid-America pipeline, which covered the period beginning May 2005 through Dec. 31, 2009, and a 16%, or 328-MBPD, increase in NGL transportation volumes. The Mid-America and Seminole pipelines accounted for 105 MBPD of this increase while the partnership's NGL import/export terminal on the Houston Ship Channel and its related pipeline accounted for 88 MBPD of the increase in transportation volumes. NGL transportation volumes for the fourth quarter of 2009 were 2.4 million barrels per day compared to 2.1 million barrels per day in the fourth quarter of 2008.
  
Gross operating margin from Enterprise's NGL fractionation business was $36 million for the fourth quarter of 2009, a 24% increase compared to the $29 million reported for the same quarter of 2008. Fractionation volumes for the fourth quarter of 2008 were 456 MBPD.
  
The partnership's propylene business reported a gross operating margin of
$21 million for both the fourth quarters of 2009 and 2008. Propylene fractionation volumes increased 29% to 71 MBPD in the fourth quarter of 2009 compared to 55 MBPD for the same quarter of 2008. While propylene fractionation volumes were significantly higher in the fourth quarter of 2009 compared to the fourth quarter of 2008, this benefit was offset by lower sales margins in the fourth quarter of 2009. Related petrochemical pipeline transportation volumes were 104 MBPD during the fourth quarter of 2009 compared to 93 MBPD in the fourth quarter of 2008.
  
Enterprise's butane isomerization business reported gross operating margin of $19 million in the fourth quarter of 2009 versus $18 million in the fourth quarter of 2008. The increase in gross operating margin was primarily attributable to an increase in revenues from sales of by-products and higher volumes. Isomerization volumes during the fourth quarter of 2009 were 93 MBPD compared to 90 MBPD in the fourth quarter of 2008.

Gross operating margin for Enterprise's octane enhancement business increased by $13 million to $7 million in the fourth quarter of 2009 from a loss of $6 million in the fourth quarter of 2008 due to higher revenues from sales of by-products and a slight increase in volume. Octane enhancement production was 13 MBPD for the fourth quarter of 2009 compared to 12 MBPD for the same quarter of 2008.   
        

January 26, 2010
Growing Petrochemical Interest in Normal Butane Seen Adding to
Summer Demand

Growing petrochemical interest in normal butane is one factor expected to support demand and prices in 2010, note gas liquids traders.
  
For 2010, normal butane prices are projected to average about $1.48375/gal, according to prices seen in the NGL forwards markets. That's more than 40cts/gal over the 2009 average price of $1.077139/gal.
  
Two basic assumptions that underpin the 2010 projection is for crude oil prices to average about $80/bbl for the year and for normal butane prices to run about 75% of crude oil, say normal butane traders. In 2009, crude oil averaged $62/bbl. The crude oil gain is a significant factor behind the near 40cts/gal leap, traders say.
  
Tight normal butane inventories are also supporting normal butane prices, traders say. Normal butane consumption for motor gasoline blending has been particularly strong this winter, noted one trader. Refiners have been cutting operating rates due to flagging motor gasoline demand. And blenders have been adding as much normal butane to gasoline as allowed under clean air regulations. A higher percentage of normal butane is allowed in motor gasoline during the winter than in summer.
  
That accounts for the seasonal nature of normal butane. It's largely consumed in the winter and is a surplus natural gas liquid, placed into storage during the summer.
  
The blending season for the 2009-2010 winter should remain strong for about
another month, but already the normal butane markets are reflecting expectations
for declining demand in February and March. On Friday, Mt. Belvieu non-TET normal butane was about $1.625/gal. February normal butane prices were running about 3.5cts/gal cheaper and March prices were running about 6.5cts/gal under
the February.
  
Second quarter normal butane prices are called to average $1.41/gal. Normal butane consumption falls significantly in the summer as refinery demand dwindles. And in 2010, refiner demand is expected to remain weak based on calls for the economy to remain sluggish, traders say.
  
A factor that could support normal butane demand over the summer is petrochemical demand. Traders note that in 2009, petchems started to favor lighter steam cracker plant feedslates. They have turned away from natural gasoline, where possible, and turned more toward normal butane, propane and ethane. Ethane has been the most profitable product to crack, followed by propane and then by normal butane,
traders say.
  
Already, traders are seeing signs of the increased interest in normal butane. One large petchem is expected to boost normal butane demand in March or April. Meanwhile, Shell and Equistar made moves in 2009 to allow their plants to crack lighter gas liquids.

As the summer continues, normal butane prices are called to drift up slightly, averaging about $1.4175/gal. And then prices see a more significant increase in the fourth quarter when the winter gasoline blending season resumes. Prices are called to average $1.44/gal, or about 2.25cts/gal higher than the third quarter.

          

January 20, 2010
ONEOK Calls for NGL Supply Growth in Mid-Continent in 2010

ONEOK Partners is looking for 2010 operating income to run about $297 million, largely due to expected natural gas liquids supply growth in the Mid- Continent.
That was part of the higher earnings guidance released by ONEOK and ONEOK Partners Tuesday.
  
ONEOK announced that for 2009, it expects annual earnings per diluted share to range from $2.85 to $2.89. That's slightly above the high end of the earnings guidance range issued by the company on Nov. 3, 2009. ONEOK Partners also announced that its 2009 results are expected to be at the high end of the earnings guidance range.
  
For 2010, ONEOK's net income is expected to be in the range of $300 million to $335 million, reflecting higher anticipated earnings from ONEOK Partners and from its distribution segments. Those could be partially offset by lower expected earnings in the energy services segment, compared with 2009.
  
ONEOK Partners' 2010 net income is expected to be in the range of $450 million to $490 million. That primarily reflects higher anticipated earnings in the natural gas liquids segment following the completion of a more than $2 billion capital investment program. Preliminary estimates for the partnership's 2010 distributable cash flow (DCF) are expected to be in the range of $580 million to $620 million.
  
"Our 2010 earnings expectations primarily reflect higher anticipated natural gas processing volumes and natural gas liquids throughput at ONEOK Partners. The distribution segment will benefit from the implementation of new rates in Oklahoma and continued operating efficiencies. The energy services segment is expected to experience lower transportation margins in 2010 due to anticipated narrower basis differentials," said John W. Gibson, president and chief executive officer of ONEOK and chairman, president and chief executive officer of ONEOK Partners.
  
ONEOK's 2010 earnings guidance reflects moving ONEOK's retail natural gas marketing business, which is forecasted to earn $8 million in operating income, to the distribution segment from the energy services segment.
  
The midpoint of the ONEOK Partners segment's 2010 operating income guidance is approximately $625 million, a company statement said. The 2010 guidance reflects higher expected NGL volumes gathered, transported and fractionated in the partnership's natural gas liquids business, primarily as a result of completing several large internal growth projects in 2009; higher anticipated natural gas processing volumes in the partnership's natural gas gathering and processing business; and higher fee-based revenues in the natural gas pipelines business.
  
The midpoint for ONEOK Partners' 2010 operating income guidance is $625 million. The midpoint of ONEOK Partners' 2010 net income guidance is $470 million. The midpoint of the natural gas liquids segment's 2010 operating income guidance is approximately $297 million. The segment's guidance reflects anticipated supply growth in the Mid-Continent, on the Overland Pass Pipeline, D-J and Piceance Lateral Pipelines and the Arbuckle Pipeline. Exchange and transportation margins are expected to increase, while marketing and optimization margins are expected to be lower as a result of narrower anticipated NGL product-price differentials. The 2010 guidance assumes the Conway-to-Mont Belvieu average ethane price differential to be 10 cents per gallon, compared with 11 cents per gallon in 2009.
  
For 2010, ONEOK Partners' capital expenditures are expected to be approximately $362 million, comprised of $278 million in growth capital and $84 million in maintenance capital. Growth capital expenditures include approximately $32 million for new well connections in the natural gas gathering and processing segment. The anticipated increase in maintenance capital is primarily related to increased investments related to pipeline integrity and non-discretionary compliance projects.ONEOK and ONEOK Partners said they release their full-year 2009 financial results on Feb. 22, 2010, following the close of the stock market.   

        

January 19, 2010
ConocoPhillips Restructures Supply and Trading Groups; Focus on
Physical Trading

ConocoPhillips has announced a reorganization plan for the existing regional supply and trading groups within its global oil and natural gas supply and optimization divisions, according to a recent internal memo to employees.
  
"This change to the organization will better position these two groups to focus on the strategic initiatives of supply excellence and trading excellence," the company said.
  
Industry sources told OPIS that the integrated upstream and downstream company is expected to change the way they trade oil and gas, with more focus on the third-party or directional oil trading. This is because the company views third-party physical trading of oil as an important contributor to the company's net profitability.
  
The company has already announced the changes at the top level. In the following months, they will implement changes down the chain, sources said.
  
ConocoPhillips has divided its trading division into supply or system trading and third-party trading.
  
Third-party trading will be run out of London, possibly due to the central location. The office in London could monitor the U.S. as well as the Asian markets. The supply trading will be carried out in Houston.
  
This change would cut at least one layer of management, sources said.
  
"Over the past few years, Commercial has grown the net income contribution to Upstream and Downstream and with this increased focus on supply and optimization and trading, the business will be better positioned to significantly increase net income contribution," the company said in its internal memo.
  
In addition to the changes in the supply and optimization and trading groups, the North American Gas and Power business and the European Gas and Power business will be combined into one group to strengthen the functional expertise and grow the business," the company said.
  
The Global liquefied natural gas business will be based in Singapore to position its equity LNG marketing managers closer to their customers.
  
Finally, the LNG Technology group will be combined with the Power Generation and Technology group to support the company's efforts in licensing technology.
  
As of Jan. 1, Chris Conway, currently president, Supply and Trading Americas, will become president, Global Trading.
  
In this newly created role, Conway will be responsible for building the global trading strategy to increase profitability by: increasing participation in the physical markets; leveraging use of existing assets and systems; strengthening trading capability; and driving global coordination.
  
He will relocate to ConocoPhillips' London office.
  
John Wright, currently president, Gas and Power, will become president,
Global Supply.
  
In this newly created role, Wright will provide overall management and strategic direction for global crude and clean products supply and optimization in support of downstream and upstream.
  
Wright will remain in the Houston office.
  
Bill Bullock, currently president, Qatar/MENA - Upstream, will become president, Global Gas and Power.
  
He will provide strategic direction and management over the company's global natural gas and power marketing and trading business.  Bullock will relocate to the
Houston office.
  
Greg Leveille, currently general manager, Worldwide LNG, will become president, Global LNG and Asia Pacific Commercial.

He will be responsible for initiating, developing and advancing equity LNGopportunities for ConocoPhillips while representing ConocoPhillips Commercial in Asia.   

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