Midstream Operations: Reshaping the Oil Refining Industry

Role of Midstream Operations in Oil Refining

Midstream operations play a crucial role in oil refining by enhancing crude utilization rates, supporting refining and marketing segments, and contributing significantly to operating cash flow. They ensure efficient transportation, storage, and distribution of crude oil and refined products, thereby bolstering the overall performance and value creation in the refining industry.

"And we've got strong refining availability that contributed to our highest crude utilization rate in over five years and Midstream reported near-record results, benefiting from strong operating performance and continued synergy capture. At Rodeo, we're processing approximately 50,000 barrels per day of renewable feedstocks." --- (PSX, earning call, 2024/Q2)

"Our Midstream segment gathers, transports, stores and distributes crude oil, refined products, including renewable diesel, and other hydrocarbon-based products, principally for our Refining & Marketing segment." --- (MPC, sec filing, 2024/Q1)

"All the spending is really self-funded from the cash from operations. We've been lifting oil and bringing it to the U.S., which has been helpful for the U.S. refining system, not just ours but others as well." --- (CVX, earning call, 2024/Q1)

"We've got midstream, we've got refining, we've got chemicals, we've got marketing and specialties And that portfolio of businesses really position us for value creation across the economic cycles." --- (PSX, conference, 2024/06/18)

"Operating cash flow excluding changes in working capital was over $1.9 billion in the quarter, driven by both our refining and midstream businesses." --- (MPC, earning call, 2024/Q1)

Technological Advancements in Midstream Operations

Technological advancements in midstream operations are driven by increased orders for non-LNG Gas Tech Equipment, strategic investments in technology and innovation, and a focus on transforming core operations to enhance efficiency and growth. Companies like Baker Hughes and Schlumberger are leading these efforts, emphasizing innovation and customer success.

"These midstream opportunities, along with solid first quarter bookings give us confidence that non-LNG Gas Tech Equipment orders will be up more than 50% this year." --- (BKR, earning call, 2024/Q1)

"Our strategy and the work we do are highly focused around driving our customers' success and creating value for our shareholders. As I think about the ChampionX's strategic priorities we have shared with our shareholders and other stakeholders, I see this combination with SLB helping advance those priorities given SLB's focus on technology and innovation and its deep customer intimacy with upstream and midstream operators around the world in every major energy producing region and operating environment." --- (SLB, event transcript, 2024/04/02)

"And I think at times, we don't get a lot of time to talk about the non-LNG sector, and it's a very important part of our portfolio, and it's very expansive as well in the equipment and solutions that play across a number of end markets, including the upstream, midstream refining, petrochemical, as you look at the pipelines and various industrial and other end markets." --- (BKR, earning call, 2024/Q1)

"I think we have been -- as we prepared our core strategy a few years back, we identified that production recovery in particular production chemicals, reservoir chemicals, and lift solutions will be a domain where we need to invest in technology, and we need to explore opportunity to accelerate our market participation because we believe two things: we believe first, that this market will benefit from further innovation, from further integration, from further disruption, and hence create through OpEx, the efficiency gains into production operations, into recovery." --- (SLB, earning call, 2024/Q1)

"To accelerate our transition to an energy technology company, we have long held the three-pronged approach of transforming the core, investing for growth and positioning for new energy frontiers." --- (BKR, earning call, 2024/Q1)

Regulatory Impacts on Midstream Operations

Midstream operators like ONEOK and Williams are actively addressing regulatory and legal challenges to ensure uninterrupted service and compliance. Williams is also focusing on emissions accountability and infrastructure development, highlighting the significant impact of regulatory policies on their operations.

"The forward-looking statements relate to our anticipated financial performance, liquidity, management’s plans and objectives for our future capital projects and other future operations, our business prospects, the outcome of regulatory and legal proceedings, market conditions and other matters." --- (OKE, sec filing, 2024/Q1)

"process is once again flawed and will be fairly easy for the FERC to resolve. In the meantime, we are taking the necessary legal and regulatory steps to address the court's concerns, and ensure that this much-needed firm transportation capacity continues to be available to serve the needs of our customers without interruptions." --- (WMB, earning call, 2024/Q2)

"At the same time, Williams is improving our own operations and holding ourselves accountable when it comes to emissions." --- (WMB, event transcript, 2024/04/30)

"And I think they're trying to do the very best to see responsible infrastructure get developed, and they realize it's very clear to them the kind of challenges that we're going to have on the grid if we don't have natural gas supplies available to provide incremental power supplies on the one hand and backing up renewables on the other." --- (WMB, earning call, 2024/Q2)

"This is really a great time for Williams as we are truly well positioned as a leader in the evolving energy landscape.I want to commend our leadership team for their commitment to being the very best in the midstream sector and for leading Williams through a dynamic time in our industry." --- (WMB, event transcript, 2024/04/30)

Strategic Partnerships in Midstream Operations

Williams Companies and Old Ironsides Energy leverage strategic partnerships, including joint ventures and equity-method investments, to expand their midstream operations significantly. Collaborations with entities like the Canadian Public Investment Fund and various regional hubs underscore their commitment to growth and operational efficiency in the midstream sector.

"(3) Includes 100% of the volumes associated with operated equity-method investments, including the Laurel Mountain Midstream partnership and Blue Racer Midstream which we operate effective January 1, 2024; and the Bradford Supply Hub and the Marcellus South Supply Hub within the Appalachia Midstream Services partnership." --- (WMB, press release, 2024/05/06)

["(3) Includes 100% of the volumes associated with operated equity-method investments, including the Laurel Mountain Midstream partnership, Blue Racer Midstream, and the Bradford Supply Hub and the Marcellus South Supply Hub within the Appalachia Midstream Services partnership. West
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"For more information on QCG, please visit www.quantumcap.com. About Old Ironsides Energy Old Ironsides Energy, LLC is an energy-focused private equity firm that partners with experienced management teams to pursue upstream and midstream opportunities in North America." --- (Old Ironsides Energy, press release, 2024/08/06)

"And so that certainly represents a target opportunity for us in terms of the joint ventures that we -- I would say, we were very fortunate to have great partners like the Canadian investment -- Canadian Public Investment Fund that helped us in the OVM area and helped us really expand that area pretty dramatically." --- (WMB, earning call, 2024/Q2)

"• Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in Northeast JV which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain, a 50 percent equity-method investment in Blue Racer, and Appalachia Midstream Investments." --- (WMB, sec filing, 2024/Q2)

Financial Performance of Midstream Operations

Midstream operations have shown strong financial performance, with Marathon Petroleum reporting key financial data and high-return projects, and Phillips 66 recognizing significant gains from asset sales and managing restructuring costs. ExxonMobil emphasizes industry-leading shareholder returns, earnings, and cash flow growth, underscoring robust midstream financial health.

"These sales volumes are included in the total sales volume amounts. Midstream The following includes key financial and operating data for the first quarter of 2024 compared to the first quarter of 2023." --- (MPC, sec filing, 2024/Q1)

"Net gain on dispositions increased $249 million and $215 million in the second quarter and six-month period of 2024, respectively, primarily due to a before-tax gain of $238 million recognized in the Midstream segment in the second quarter of 2024 associated with the sale of our 25% ownership interest in REX." --- (PSX, sec filing, 2024/Q2)

"First, leading performance, being the undisputed industry leader in shareholder returns, earnings and cash flow growth, safety, reliability, GHG emissions intensity and cost and capital efficiency.2nd, essential partner, creating value through win win solutions for our customers, partners and broader stakeholders." --- (XOM, event transcript, 2024/05/29)

"This quarter, in conjunction with the planned turnaround activity, we took the opportunity to execute incremental, smaller, high return, quick hit projects focused on optimization and reliability initiatives." --- (MPC, earning call, 2024/Q1)

"Restructuring costs, related to the integration of DCP Midstream, primarily reflect severance costs, consulting fees and contract exit costs. A portion of these costs are attributable to noncontrolling interests." --- (PSX, press release, 2024/07/30)

Environmental Impacts of Midstream Operations

Midstream operations are increasingly focusing on reducing environmental impacts. Williams Companies emphasizes the role of natural gas in lowering greenhouse gas emissions, while ONEOK highlights the integration of sustainable aviation fuel and expansion of NGL-related projects to support sustainable growth.

"We are focused on proving up that the natural gas industry can play an even more important role in providing affordable and reliable energy while also continuing to reduce greenhouse gas emissions here at home and around the world.And so with that, I'll turn it over to John to walk through the second quarter financials. John?" --- (WMB, earning call, 2024/Q2)

"Also in July, we received our first shipment of sustainable aviation fuel at our Galena Park Marina terminal in Houston, facilitating growth with sustainable fuels in this market.These opportunities are all in addition to our previously announced NGL-related growth projects, including our MB-6 fractionation and expansions of our Elk Creek and West Texas NGL pipelines." --- (OKE, earning call, 2024/Q2)

Future Outlook of Midstream Operations

ExxonMobil, Phillips 66, Chevron, and Valero Energy all express strong confidence in their future midstream operations, highlighting strategic positioning, sustainability plans, robust project pipelines, and positive legislative trends.

"Under any future scenario, we're convinced that our company is uniquely positioned to play a leading role, meeting the world's essential needs for energy and high value products. Thanks for the question." --- (XOM, event transcript, 2024/05/29)

"We based these forward-looking statements on our current expectations, estimates and projections about us, our operations, our joint ventures and entities in which we have equity interests, as well as the industries in which we and they operate, and our sustainability-related plans and goals." --- (PSX, sec filing, 2024/Q1)

"And then, of course, we've got other Gulf of Mexico projects as well that are kind of stacked up right behind Anchor over subsequent quarters. So the outlook in the U.S. is especially strong." --- (CVX, earning call, 2024/Q1)

"And so longer term, if you look at '25, I would think the long-term outlook of RD is still positive because you look at the number of LCFS programs that are still being contemplated by legislation this year, the ramps in Canada and the UK continue to be strong." --- (VLO, earning call, 2024/Q1)

"the future. I'm convinced we're positioning ExxonMobil to outperform and lead all of industry." --- (XOM, event transcript, 2024/05/29)