Some strapped oil and gas companies selling off pipelines

February 3, 2015 | By Doug Peeples

The impacts of the rapid plunge in crude oil prices have been documented in a number of ways: budget cuts; exploration and drilling slowed or stopped altogether; then layoffs in the industry and in the companies that supply it with pipe and other equipment. Very recently, that impact was underscored by the decision some companies have made to put their pipelines and processing facilities up for sale.

Not all oil and gas industry professionals agree on how long prices will remain depressed. They and several analysts say the low prices are temporary and it is only a matter of time before they bounce back. Others, like BP CEO Bob Dudley, said recently he expects prices to remain low for at least a year and possibly for several years. BP had been working on streamlining operations and job reductions for some time, but accelerated its timetable when prices began to tumble.

But as Bloomberg explained, those belt tightening strategies have not been the end of it. Billionaire shale oil entrepreneur Harold Hamm and Encana Corp., a major Canadian gas company, have been among the most recent examples of companies that chose to sell their pipeline and processing plant interests, referred to in the industry as the midstream part of the business.

As low prices continue, the value of drilling operations drops while equipment like pipelines and plants hold their value. And, as the report noted, selling those lucrative assets means companies can hang onto their oil fields.

As Encana chief operating officer Mike McAllister was quoted as saying, "I'd rather be putting that money into wells and generating a better return than putting it into facilities."

That philosophy apparently holds true even after considering companies which sell those assets will pay more to process and move their product through equipment that was once theirs.

For more:
- see this background article

http://www.fierceenergy.com/story/some-strapped-oil-and-gas-companies-selling-pipelines/2015-02-03