Midstream consolidation in the Permian this quarter continues to light up headlines as big names build up bigger portfolios to handle record production volumes. The largest of these, of course, is the merger of Tulsa-based ONEOK and Magellan Midstream Partners—and a strategy that brings natural gas, NGL, crude oil, and refined products infrastructure under a single roof. But for smaller Permian midstreamers operating both oil and gas gathering systems, when does a single focus make for a better strategy?
Reese Energy Consulting today is following the latest from Dallas-based LM Energy Holdings, which will wave goodbye to its Touchdown Crude Oil Gathering System in the Delaware’s Lea and Eddy counties, N.M. The price and buyer weren’t disclosed. The deal includes 130 miles of crude pipe flowing 75 MBPD and two terminals with 136 MBbls. of storage capacity. LM put shovel to dirt on Touchdown in 2019, becoming its first project before officially launching the company later that year. Next on the to-do list was building natural gas gathering bones also in the Delaware, where LM operates 70 miles of pipe. The company will flip the switch on a sixth compressor for that system before the end of the year.
Amid record gas volumes and a death-stare on producer flaring, LM believes going all in on natural gas is a pivot that checks every box for long-term growth. With an infusion of capital from the sale of Touchdown, the company plans to build more gathering and, maybe, processing infrastructure going forward in a play hollering for both.