Nov. 25—Growing natural gas production in the Permian Basin, especially from the Delaware Basin, is giving rise to new companies seeking to take advantage of that growth.
One such company is Cardinal Midstream Partners, founded this spring by a group of industry veterans to provide natural gas gathering and processing as well as congruent carbon capture and sequestration. It has secured an initial capital commitment of $300 million from EnCap Flatrock Midstream.
The company has begun building its infrastructure with an agreement to acquire the Delaware Basin natural gas gathering and processing assets of Medallion Midstream Services in a deal expected to close early next year.
"This will definitely be our initial and a critical asset base we intend to grow from," Clayton Hewett, Cardinal's chief operating officer, told the Reporter-Telegram in a telephone interview.
Cardinal will be acquiring a system that spans Loving and Reeves counties and includes approximately 80 miles of high- and low-pressure natural gas gathering pipelines and a 140 million cubic feet per day natural gas processing facility. Hewett said the Medallion team has done a great job with the assets and Cardinal plans to "carry that forward and adopt their best practices."
He added that the company will focus on the Delaware and "intends to explore opportunities as they present themselves" to expand the company.
"At our heart, we are natural gas midstream folks," said Doug Dormer, chief executive officer. "This acquisition is right in our fairway. It's what we wanted to do where we wanted to do it."
Carbon capture and sequestration services are very complementary to the natural gas gathering, compression, processing and transmission downstream that the company will offer, he said.
Hewett agreed, saying the industry has long referred to it as acid gas injection. New carbon capture and storage projects are difficult, but things are happening, he said.
"It has the potential to be a very significant part of the industry," he said.
There has been very positive feedback from the announcement of Cardinal's formation, Hewett said. "A lot of folks are pulling for us. They're glad to see new capital entering the Permian Basin."
The leadership team that founded Cardinal, alongside Dormer and Hewett, include Douglas Gale as chief financial officer and Justin Garrity as chief commercial officer, a team Hewett called entrepreneurial.
With the Permian Basin forecast to see significant growth in production of the natural gas associated with its crude oil production, Hewett said Cardinal can be a good partner to operators.
"We are very bullish on natural gas," he stated. "Really, natural gas is abundant, and we have very smart operators able to extract it and produce it in quantities our country needs and other countries."
What gives him cause for concern is the supply chain bottleneck and cost inflation, Hewett said.
Added Dormer, "one other thing would be a change in the regulatory environment that could have a significant impact — and the timing."
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