The tropical storm in the Gulf of Mexico made headway over the weekend and is likely to cause increased production cuts in later cycles of gas day 29, based on updates from offshore pipeline operators. Total Southeast production fell 0.1 Bcf/d from Friday and 0.3 Bcf/d from its weekend peak on Saturday, with offshore sample declines in Alabama, Louisiana, and Mississippi making up 0.1 Bcf/d of Friday to Monday declines. Destin Pipeline announced on Monday morning it moved to Phase 3 of its Severe Weather Contingency Plan, which will result in evacuations of all personnel from its offshore system, including from the MP 260 platform. The evacuations are expected to occur between 9am and 1pm today, forcing the shut in of receipts from Okeanos gathering system, Marlin and Horn Mountain receipt points with no transportation services to Viska Knoll. Deliveries to Viska Knoll at MP 260 averaged roughly 250 MMcf/d in the week ending Friday, falling to an average of 138 MMcf/d over the weekend and down to just 30 MMcf/d today.
Midcon Market gas production averaged 1.57 Bcf/d this month-to-date, a minor drop of 3% compared to July’s average of 1.62 Bcf/d. So far this month 59 wells have been drilled in North Dakota, a small drop compared to 63 wells drilled in July. In contrast, rig counts in North Dakota increased by three from July, averaging 32 rigs so far this month. Flat production could be an indication of producers adding drilled-but-uncompleted wells (DUCs) to their inventory. In a news release earlier this month, Continental Resources reiterated year-end 2016 guidance, stating it currently has 165 DUCs in the Bakken with plans to grow that number to 190 by year-end. From January to May (the last month of reliable DUC data), Bentek estimates an average of 30 DUCs per month were added to North Dakota’s well inventory, totaling 615 DUCs for the region in May.
Texas Eastern on Friday released its bi-weekly status report on the Delmont outage, which indicated approximately 25% of the necessary repair work had been completed, up from 15% over the course of two weeks. The Penn Jersey Line, which is the northern of the two systems in Zone M3, has been operating at a reduced capacity of roughly 1.1 Bcf/d since mid-May, down from a typical operating capacity of around 2.6 Bcf/d, following a late-April explosion. A corrective action order was issued by PHMSA in the days after the outage, further amended in late July to undergo an elevated level of scrutiny. This latest report's implied rate of progress on the repairs puts into question the feasibility of a full capacity restoration by November 1, although TETCO has not revised that date. Uncertainty around a timely return-to-service before higher winter demand hits the region has cast a layer of volatility on basis futures, with Transco Zone 6 trading as high as 40 cents over Algonquin Citygates from a nearly minus 60-cent spread prior to the M3 outage, though the two have more recently converged to within a 4-cent spread. The next report, expected on Sept. 9, will firm up expectations on a rate of progress.