Crestwood's Strategic Moves and Positive Outlook in Energy Industry
2023-08-04
Crestwood, a leading energy company, recently held its earnings call meeting where several important topics were discussed. One of the key highlights of the meeting was the execution of an amendment with preferred holders. This amendment allows Crestwood to partially redeem a portion of the security at the beginning of next year and roll over the remaining portion for another two years at a slightly higher cost of capital. This strategic move helps mitigate financing needs, locks in attractive capital, and allows the business to naturally delever over the next few years.
Another significant topic discussed during the meeting was the company's outlook for the Williston region. Despite a delayed start to the drilling and completion (D&C) season due to weather conditions, there was a notable increase in activity during the second quarter. Operators brought wells back online, resulting in flush production. Crestwood has reaffirmed its positive outlook for Williston, with customers expressing a desire to accelerate additional D&C activity. This indicates strong demand and potential growth opportunities in the region.
One of the driving factors behind this optimism is the premium price at which Bakken crude, the preferred choice for buyers, is trading compared to West Texas Intermediate (WTI). Additionally, Williston's volumes have been steadily increasing since the beginning of the year, supported by healthy rig counts. Crestwood is particularly excited about the City of Williston and has plans to bring on more D&C activity, highlighting the company's belief in significant growth and profitability in the region.
Looking at the overall market outlook, Crestwood remains positive despite some challenges faced in the second quarter. The company expects to reverse losses and increase margins in the second half of the year. The fundamentals of their business are strong, with growth in well connects, drilling activity, and production across all assets. Crestwood has also made progress in their sustainability efforts and received recognition for their environmental, social, and governance (ESG) commitments.
The competitive landscape in the oil and gas industry is evolving, with recent mergers and acquisitions reshaping the industry. Crestwood mentioned witnessing a shift in the completion of wells in the Delaware basin into 2024 due to the acquisition of two operators, Novo and Callon. These acquisitions are expected to have a positive impact on the outlook for the basin, indicating a more consolidated competitive landscape where companies strategically acquire assets to strengthen their market positions.
Crestwood's capital spending plans include expanding the Rough Rider system, investing in growth capital in the Delaware basin, maintaining a strong balance sheet, and generating substantial free cash flow in the future. The company anticipates total growth capital investments for 2023 to be between $135 million and $155 million.
In conclusion, Crestwood's earnings call meeting covered a range of important topics. The execution of an amendment with preferred holders provides the company with flexibility and financial stability. The positive outlook for the Williston region and the company's strong market position further contribute to their optimistic outlook for the future. With a focus on sustainability and strategic capital investments, Crestwood is well-positioned for continued growth and success in the energy industry.