East Daley: Colorado’s Initiative 97 Creates an Uncertain Future for Oil and Gas Companies
If Initiative 97 passes in November, the Initiative would have an
extensive impact to exploration and production (E&P) and midstream
companies that operate in Colorado, including Extraction Oil and Gas
(XOG), SRC Energy (SRCI), Western Gas Partners (WES) and DCP Midstream
(DCP).
East
Daley Capital Advisors, Inc., an energy information and insights
provider that is redefining how markets view risk for midstream and E&P
companies, released a report highlighting potential impacts should
Initiative 97 pass in the November election. Initiative 97 is creating
unease for oil and gas companies and impacting equity values for several
producers and midstream companies that operate in Colorado. If passed,
the Initiative would have a tremendous impact on earnings for many oil
and gas companies that operate in the state.
“A potential sudden hit to growth or elimination of growth for pure-play
Denver-Julesburg (DJ) producers, such as Extraction Oil and Gas and SRC
Energy, is the likely culprit behind equity price volatility,” said
Justin Carlson, VP and Managing Director, Research at East Daley
Capital. “When it comes to midstream companies, Western Gas Partners and
DCP Midstream are watching this regulatory risk closely. Other companies
could also be impacted by the ruling, as Williams recently purchased the
Discovery System in the area and there are many gas, oil and NGL
pipelines that would also be affected.”
East Daley analysis indicates that there would be a trickle-down impact
to midstream companies. Of the midstream companies that East Daley
monitors, Initiative 97 would have the largest impact to Western Gas
Partners and DCP Midstream. As of August 22, there were 31 active rigs
in the DJ Basin, 12 of which were connected to DCP Midstream’s assets
system and 13 of which were connected to Western Gas Partners’ DJ
footprint. Using East Daley’s Production Scenario Tool (PST) specific to
Western Gas Partners and DCP Midstream’s G&P systems and replacing the
current rig assumptions with the proposed drilling ban in January 2019,
the resulting production forecast is a natural volume decline for each
system.
The Colorado secretary of state confirmed in August that the number of
required signatures met the threshold to get Initiative 97 on the
November ballot. However, the Initiative will face widespread opposition
from political leaders on both sides of the aisle. According to the
Colorado Oil & Gas Association (COGA), the initiative would eliminate
about 94% of non-Federal land in Weld County, which is where most
Colorado oil and gas drilling is occurring.
Contact
East Daley for more information on how Initiative 97 is
impacting the midstream market. East Daley will continue to monitor this
initiative and report updates as they become available leading up to the
November elections.
East Daley has the largest asset database of U.S. energy infrastructure
tied to EBITDA and its patent-pending production allocation model,
combined with in-depth analysis, brings greater transparency to the
energy and commodity financial market by providing investors and market
participants with deeper, more accurate data to inform their investment
and strategy decisions.
About East Daley Capital Advisors, Inc.
East Daley Capital is an energy information and insights provider that
is redefining how markets view risk for midstream and exploration and
production (E&P) companies. In addition to using top-level financial
data to predict a company’s performance, East Daley delivers asset and
commodity analysis that provides comprehensive, fact-based intelligence.
Supported by a team of unbiased, experienced financial and commodity
analysts, East Daley provides its clients unparalleled insight into how
midstream and E&P companies operate and generate cash flow, in addition
to commodity forecasting. East Daley uses publicly available fundamental
data and intersects that data with a company’s reported financials to
asset-level adjusted-EBITDA and distributable cash flow (DCF). The
result allows for more informed investment decisions. Founded in 2014,
the company is based in Centennial, Colorado. For more information visit http://www.eastdaley.com.
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Copyright Business Wire 2018
Source: Business Wire
(September 12, 2018 - 9:21 AM EDT)
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