Crude oil gathering systems in the Permian and elsewhere are, by their very nature, evolving things. They increase in mileage and crude-carrying capacity as new wells are drilled and completed, and it’s not uncommon for smaller systems to be consolidated into larger ones. It’s also become typical for the ownership of these systems to change — sometimes year to year — as early investors cash in on what they’ve developed, and buyers see opportunities to rake in increasing revenue and take their newly acquired systems to the next level. Also, owners of neighboring systems sometimes form joint ventures that combine their assets, all to make their operations work better for their producer customers. Today, we continue our series on Permian gathering with a look at Brazos Midstream’s crude gathering system in the Delaware Basin, which has experienced considerable evolution.
Already, we’re arrived at a baker’s dozen blogs in this series on Permian crude gathering systems. Before we get to Brazos Midstream’s system, we’ll provide a quick recap of what we discussed in the first 12 blogs. Part 1 looked at the Beta Crude Connector, a 100-mile-plus, 150-Mb/d system that a joint venture of Concho Resources and Frontier Energy Services is developing in the Midland Basin to serve Concho and other producers. Part 2reviewed Reliance Gathering’s 185-Mb/d pipeline network — also in the Midland — which was originally developed to serve the affiliated producer Reliance Energy, but has since undergone a number of expansions to serve other producers too. In Part 3, we considered San Mateo Midstream’s crude gathering systems in the Delaware Basin — one in Eddy County, NM, and the other in Loving County, TX — and the company’s plans for two new systems on the New Mexico side of the state line. Part 4turned to Medallion Midstream’s fast-growing, 1,000-mile crude oil gathering/header system in the Midland (which provides access to firm shippers serving 20 producers) and its 116-mile Delaware Express gathering/shuttle system in the southern Delaware.
In Part 5, we discussed the 200-mile gathering system that refiner Delek US has been developing in the Midland to deliver locally produced crude to Delek’s Big Spring, TX, refinery and others. Part 6 examined the crude gathering system that a joint venture of WPX Energy and Howard Energy Partners (HEP) has been developing in the Delaware Basin’s Stateline area, while Part 7 reviewed Oryx Midstream Services’ 860-mile Oryx Trans-Permian gathering and regional transport system. In Part 8, we discussed 3 Bear Energy’s Hat Mesa Oil Gathering System, which over the past couple of years has grown to become a network of 200 miles of gathering lines and small trunk lines in the northern Delaware Basin. Part 9 focused on the Permian gathering system now owned by MPLX, and Part 10 reviewed EnLink Midstream’s Greater Chickadee gathering system in the Midland and its Avenger system in the Delaware. In Part 11, we turned to NuStar Energy, which entered the Permian two-plus years ago with its acquisition of Navigator Energy Services’ 520-mile crude gathering system in the Midland, and has since added some 350 miles of new pipe and tripled the volume of crude flowing through the system. And last time, in Part 12, we looked at EagleClaw Midstream, which — through a combo of acquisitions and expansions — has assembled a big gas gathering and processing network in the Delaware Basin, as well as 150 miles of crude gathering pipelines, 90 Mbbl of crude storage capacity, and connections to key pipelines out of the play. [One more thing: in our Happy Together blog last month, we looked at Salt Creek Midstream’s ongoing buildout of extensive gathering assets in the Permian — not just for crude, but for natural gas, NGLs and produced water.]
Now, on to Brazos Midstream. The Fort Worth, TX-based company got its start in April 2015, by which time crude oil prices had slid by more than half (to less than $50/bbl) from their mid-2014 highs. With financial backing from Old Ironsides Energy, a then-new private equity firm, Brazos quickly determined that the Permian (and more specifically the southern Delaware Basin in West Texas) would offer the best midstream development opportunities, and concentrated its efforts there. The move proved to be prescient. Thanks to producers’ success in “cracking the code” in the Wolfcamp, Bone Spring and other hydrocarbon-rich formations, the Permian turned out to be the only crude-focused shale play where production actually increased during the mid-decade downturn in crude prices — the new wells also generated large volumes of associated gas, much of it rich in NGLs. Soon after Brazos’s launch, the company partnered with Jetta Operating Co. to build out and upgrade its small crude and gas gathering system in Ward and Reeves counties. By April 2017, Brazos had 35 miles of crude gathering pipelines and two crude storage terminals (Bison and Cross V) with a combined capacity of 50 Mbbl, as well as about 150 miles of gas gathering pipelines and a 60-MMcf/d gas processing plant (Comanche I, in eastern Reeves County). That month, Brazos entered into an important gas processing contract with Diamondback Energy for the roughly 100,000 gross acres Diamondback had recently acquired from Brigham Resources in Reeves and Pecos counties. This contract helped underwrite the development of a new 200-MMcf/d processing plant (Comanche II) right next door.
In October 2017, Brazos acquired Callon Petroleum’s natural gas gathering system in Ward and Pecos counties, and entered in a long-term, feebased deal with Callon to gather and process the producer’s gas. With the Callon agreement, Brazos increased its dedicated acreage to about 240,000 acres; other producers (in addition to Diamondback) included XTO Energy, Anadarko, Parsley Energy and Concho Resources. More of that evolution we mentioned in our intro came in April 2018, when Brazos and Old Ironsides announced that the midstream company — then with a total of 350 miles of crude and gas gathering lines, 260 MMcf/d of gas processing capacity (and the 200-MMcf/d Comanche III processing plant, then under construction and now in operation), and more than 300,000 acres under dedication — was being sold to an investment fund managed by Morgan Stanley Infrastructure (North Haven Infrastructure Partners II) for a cool $1.75 billion. (The deal closed the following month.) Then, in November 2018, Brazos entered into a joint venture ( JV) with midstream giant Williams under which Williams contributed its existing gas gathering assets in the southern Delaware to the JV in exchange for a 15% stake in it. Brazos followed up its JV with Williams with a deal to gather Shell’s natural gas and effectively move the system northward into Loving and Winkler counties.
Brazos now has about 75 miles of 4-to-8-inch-diameter crude gathering pipeline (pink lines in Figure 1), a total of 75 Mbbl of crude storage at the Bison and Cross V terminals (blue pentagons), 725 miles of gas gathering pipes (brown lines) and — with the start-up of the Comanche III gas processing plant in March 2019 — 460 MMcf/d of processing capacity at the Comanche complex in eastern Reeves County (lavender diamond). The company’s gathering and processing footprint is larger too; with the Williams JV and the new Shell contract, it now includes more than 500,000 dedicated acres in Reeves, Loving, Winkler, Ward, Pecos and Culberson counties.
Brazos’s crude-related gathering assets are focused on two areas: one of two systems runs along the Pecos River in eastern Reeves County and western Ward County, and the other is in northwestern Pecos County. In contrast to many other crude-gathering-system owners in the Permian, Brazos does not have a crude marketing company, it does not first purchase and then sell oil, and it does not own or have an interest in any downstream takeaway pipelines. Instead, it operates as a fee-charging crude header system whose focus is to help producers move their crude from the lease to the takeaway pipes of their choice. The company’s Bison and Cross V terminals each have a 30-Mbbl tank and multiple other smaller tanks, again for a total of 75 Mbbl of storage. Bison is connected to Oryx Midstream’s Oryx Trans-Permian Pipeline (OTP; purple line). OTP runs to Crane, TX, and Midland, TX, where crude can flow either directly or through pump-over into any number of takeaway pipelines to Cushing, OK, or the Texas coast. The Cross V terminal, in turn, connects to Energy Transfer’s Permian pipeline network (Hoover Pipeline), which can take crude to Crane, Midland or Wink, TX — another hub that offers multiple takeaway options. Our understanding is that Brazos plans to continue building out its crude and gas gathering systems in the southern Delaware — including new lines to serve Shell — and will build another 200- MMcf/d gas processing plant (Comanche IV), probably in northern Ward County.
In the next blog in this series, we’ll provide an overview of existing and planned crude gathering systems in the Permian’s Midland Basin.
“Have It All” was written by Jason Mraz and members of his live backup band Raining Jane : David Hodges, Jacob Kasher Hindlin, Mona Tavakoli, Chaska Lela Potter, Mai Sunshine Bloomfield and Rebecca Emily Gebhardt. It was the lead single from his sixth studio album Know, and went to #10 on the Billboard Adult Top 40 chart. Mraz says the song’s inspiration came from a spiritual encounter the singer had while traveling in Southeast Asia. Know was produced by Mraz and Andrew Wells, and released in August 2018. It went to #9 on the Billboard Top 200 Albums chart.
Jason Mraz is an American singer-songwriter. His use of nylon-stringed guitars and Brazilian rhythms help to make his song stylings unique. He has released six studio albums, five live albums and 17 singles, and has sold more than 7 million albums and 11 million downloaded singles. Mraz has won two Grammy Awards and two ASCAP Awards. He still records and tours to this day.