NE United States: New Takeaway Nat Gas Pipeline Capacity Coming Online

Value Digger

When it comes to natural gas, the new takeaway pipeline capacity coming online this winter in the Northeast is illustrated below:

Specifically, between now and the end of the withdrawal season, an additional 4.5 Bcf/d of takeaway capacity will be in service, transporting natural gas from the Northeastern Appalachian production region to Midwest and Southeast markets and allowing pipelines to more easily meet demand needs.

Among the large projects is Energy Transfer's Rover pipeline (3.25 Bcf/d) which will move natural gas from Appalachia to the Midwest, as illustrated below:

The Rover pipeline will be completed in three phases. The first phase (0.7 Bcf/d) was granted in-service authorization in August 2017. The second phase (1.4 Bcf/d) will be in service by year end. The third phase (1.15 Bcf/d) is estimated to be in service in March 2018. According to S&P Global Platts, 2.95 Bcf/d of the project is subscribed by binding commitments.

The other large pipeline project is TransCanada's Leach XPress (1.5 Bcf/d), as illustrated below:

This project will bring natural gas from the Appalachian basin to the Southeast. Although it was expected to be complete this Fall, there were many delays and it's now expected to be in service in Jan 2018.

And there is also Williams' Atlantic Sunrise that will transport up to 1.7 Bcf/d from the Marcellus shale in Pennsylvania to markets in the U.S. Mid Atlantic and Southeast. Given that the U.S. Court of Appeals for the District of Columbia dissolved the Nov. 6 stay last month, the pipeline is expected to be in service by mid-2018, as illustrated below:

As such, I don't foresee a repeat of 2013-2014 with natural gas prices spiking over US$5/mmbtu even if polar vortex hits the US more than once this winter.

Moreover, I forecast that inventories will not fall below 1,600 BCF at the end of the withdrawal season and Henry Hub price will remain above US$3/mmbtu for the most part of 2018. This remains a preliminary projection and will be revised over the next weeks as finalized temperature and pipeline data is integrated into my model.

Lastly, these developments have positive implications for two group of companies:

1) The chief beneficiaries (main shippers) for the increased capacity are producers that have staked out prime positions in that region and are dominating the Marcellus and Utica plays, although some have backed down on drilling in light of the spread between Henry Hub and Marcellus natural gas price. There producers are totally or primarily focused on this region such as Range Resources (RRC), EQT Corporation (EQT), Cabot Oil & Gas (COG), Southwestern Energy (SWN), Antero Resources (AR) and Epsilon Energy (EPS.T, EPSEF).

2) And there are those with a big presence in the Appalachian region such as Chevron (CVX), CONSOL Energy (CNX), ExxonMobil (XOM) through XTO Energy, Chesapeake (CHK), Anadarko (APC) Gulfport Energy (GPOR), Enerplus (ERF) and privately-held HG Energy LLC based in Parkersburg, W.V., that acquired Noble Energy's (NBL) upstream Marcellus assets in northern West Virginia and southern Pennsylvania for $1.225 billion last May. NBL had to sell these assets to reduce its debt resulting from the Clayton Williams Energy (CWEI) transaction, which materially expanded the company’s core Delaware Basin position.

If you want to be ahead of the crowd generating unrivaled returns that often exceed 100%, consider subscribing to "The Knowledgeable Investor" by Value Digger, the insightful Newsletter where you will discover unknown and underfollowed companies that are potential multi-baggers along with high-yield dividend stocks (yields above 7%).

Our picks are debt-free or low leverage stocks with catalysts. And Value Digger has more than 10,000 followers on Seeking Alpha while also being ranked in the TOP-100 on out of over 6,000 financial bloggers and analysts worldwide.

As such, we are confident that this subscription (just $99 for 6 months, a limited-time offer) will pay for itself many times over thanks to our proven track record, our almost 30 years of experience in the stock markets and our painstakingly selected picks from a wide variety of sectors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions expressed here are solely my opinion and should not be construed in any way, shape, or form as a formal investment recommendation. Value Digger does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. Investors are advised that the material contained herein should be used solely for informational purposes. Investors are reminded that before making any securities and/or derivatives transaction, you should perform your own due diligence. Investors should also consider consulting with their broker and/or a financial adviser before making any investment decisions.