Energy Sector: War Warnings Sharpen, Gas Projects Enter Service
Energy companies paired more explicit military-risk language with operating milestones for natural gas pipelines and LNG exports.
Summit Midstream Corp (SMC), the midstream operator, expanded its commodity-price warnings in August to name “the ongoing U.S. military operation in Iran.” Its May warning had identified threatened and actual closures of oil shipping routes, including the Strait of Hormuz, by Iran and affiliated groups. In August, Summit also named the U.S. military operation in Venezuela among foreign events affecting commodity prices, describing those conditions as an ongoing influence that it expects to continue affecting its business.
Other warnings persisted through the survey window. Devon Energy Corp (DVN), the oil and gas producer, retained the same language about tariffs and midstream capacity constraints in its May 7 and May 21 updates. The company lists new or increased tariffs among potential sources of oil, gas and NGL price volatility, and limits on infrastructure construction among potential causes of production interruptions.
Exxon Mobil Corp (XOM), the oil and natural gas producer, reported specific operational effects. The company said higher crude and gas realizations were partly offset by lower volumes from “Middle East impacts,” operational disruptions in Kazakhstan and U.S. winter storm Fern. Exxon also reported an export milestone: its Golden Pass LNG joint venture achieved first production from Train 1 at the end of March, followed by the loading and departure of its first export cargo in April. The company described the cargo as a step toward full commercial operations.
Energy Transfer LP (ET), the pipeline and midstream operator, gave another concrete account of infrastructure reaching service. In August, the company said its Hugh Brinson Pipeline was “now in commercial service” and expected it to be capable of flowing its full Phase I capacity by September 1. Energy Transfer named power generation and LNG exports as drivers of increasing demand for natural gas infrastructure. It also said a 14-mile lateral in Abilene, Texas, completed during the second quarter, was ready for service.
Kinder Morgan, Inc. (KMI), the pipeline operator, linked reported volume growth to several of those uses. Second-quarter natural gas transport volumes rose 7% from a year earlier, primarily because of LNG deliveries on TGP, increased demand for its Texas Intrastate services, exports to Mexico and higher power generation demand in Arizona. Natural gas gathering volumes rose 26%, with KinderHawk recording the largest growth across its systems.
Targa Resources Corp. (TRGP), the gathering, processing and pipeline operator, attributed higher pipeline transportation and fractionation volumes primarily to increased supply from its Permian systems and the addition of Train 11 early in the second quarter. The company said higher volumes and fees increased LPG export margin. It also attributed higher operating expenses primarily to compensation and benefits, including amounts related to system expansions.
Commodity exposure remained explicit alongside those operating developments. Targa reported second-quarter realized natural gas hedge gains and crude oil hedge losses attributable to its equity volumes and included in Gathering and Processing adjusted operating margin. BKV Corp (BKV), the natural gas producer with power generation operations, said it uses derivatives to hedge anticipated production and power generation, and cautions that “market risks beyond our control” can still affect its financial condition, results and cash flows.
Centerpoint Energy Inc (CNP), the energy provider, keeps changes in service-territory demand and consumption among its forward-looking risks, explicitly naming data centers, energy refining and exports, and advanced manufacturing. The company also identified its proposed sale of the Ohio natural gas distribution business as a transaction whose completion, timing and anticipated benefits remain uncertain.