DCP Midstream, LP, together with its consolidated subsidiaries, owns, operates, acquires, and develops a diversified portfolio of complementary midstream energy assets.
The company is one of the largest processors of natural gas and one of the largest producers and marketers of NGLs in the United States with a diversified portfolio of integrated assets across the company’s value chain. The company’s operations and activities are managed by its general partner, DCP Midstream GP, LP.
Business St...
DCP Midstream, LP, together with its consolidated subsidiaries, owns, operates, acquires, and develops a diversified portfolio of complementary midstream energy assets.
The company is one of the largest processors of natural gas and one of the largest producers and marketers of NGLs in the United States with a diversified portfolio of integrated assets across the company’s value chain. The company’s operations and activities are managed by its general partner, DCP Midstream GP, LP.
Business Strategy
The company’s business strategies include operational performance; organic growth; and strategic acquisitions and partnerships.
Segments
The company’s operations are organized into two reportable segments: Logistics and Marketing; and Gathering and Processing.
The company’s Logistics and Marketing segment includes transporting, trading, marketing, and storing natural gas and NGLs, and fractionating NGLs. The company’s Gathering and Processing segment consists of gathering, compressing, treating, and processing natural gas, producing and fractionating NGLs, and recovering condensate. The remainder of the company’s business operations are presented as ‘Other’.
Logistics and Marketing segment
This segment markets the company’s NGLs, residue gas and condensate; and provides logistics and marketing services to third-party NGL producers and sales customers in significant NGL production and market centers in the United States. This includes purchasing NGLs on behalf of third-party NGL producers for shipment on the company’s NGL pipelines and resale in key markets.
The company’s NGL services include plant tailgate purchases, transportation, fractionation, flexible pricing options and price risk management. The company’s primary NGL operations are located in close proximity to its Gathering and Processing assets in each of the operating regions.
The company’s NGL pipelines transport NGLs from natural gas processing plants to fractionation facilities, petrochemical plants and a third party underground NGL storage facility. The company’s pipelines provide transportation services to customers primarily on a fee basis.
The company’s natural gas systems have the ability to deliver gas into numerous downstream transportation pipelines and markets. The company sells residue gas on behalf of the company’s producer customers and residue gas, which the company earns under its gas supply agreements, supplying the residue gas demands of end-use customers physically attached to the company’s pipeline systems and managing excess capacity of its owned storage and transportation assets. End-users include large industrial companies, natural gas distribution companies and electric utilities. The company is focused on extracting the highest possible value for the residue gas that results from the company’s processing and transportation operations. The company sells the residue gas at market-based prices.
NGL Pipelines
DCP Sand Hills Pipeline, LLC, or the Sand Hills pipeline, an interstate NGL pipeline which is owned 66.67% by the company and 33.33% by Phillips 66, is a common carrier pipeline that provides takeaway service from plants in the Permian and the Eagle Ford basins to fractionation facilities along the Texas Gulf Coast and at the Mont Belvieu, Texas market hub.
DCP Southern Hills Pipeline, LLC, or the Southern Hills pipeline, an interstate NGL pipeline which is owned 66.67% by the company and 33.33% by Phillips 66, provides takeaway service from the North and Midcontinent regions to fractionation facilities at the Mont Belvieu, Texas market hub.
Front Range Pipeline LLC, or the Front Range pipeline, an interstate NGL pipeline in which the company owns a 33.33% interest, originates in the DJ Basin and extends to Skellytown, Texas. The Front Range pipeline connects to the company’s O'Connor plants, Lucerne 1, Lucerne 2, and Mewbourn plants, as well as third party plants in the DJ Basin. Enterprise Products Partners L.P., or Enterprise, is the operator of the pipeline.
Texas Express Pipeline LLC, or the Texas Express pipeline, an intrastate NGL pipeline in which the company owns a 10% interest, originates near Skellytown in Carson County, Texas, and extends to Enterprise's natural gas liquids fractionation and storage complex at Mont Belvieu, Texas. The pipeline also provides access to other third party facilities in the area. Enterprise is the operator of the pipeline.
The Southern Hills, Texas Express, and Front Range pipelines have in place long-term, fee-based transportation agreements, a portion of which are ship-or-pay, with the company, as well as third party shippers. These NGL pipelines collect fee-based transportation revenue under regulated tariffs.
Natural Gas Pipelines
Gulf Coast Express LLC, or the Gulf Coast Express pipeline, an intrastate natural gas pipeline in which the company owns a 25% interest, originates from the Waha area in West Texas to Agua Dulce, in Nueces County, Texas. Kinder Morgan is the operator of the pipeline. The Gulf Coast Express pipeline is fully subscribed under long-term transportation contracts with the company and third party shippers.
The Guadalupe pipeline is an intrastate natural gas pipeline that provides the company accesses to market centers/hubs, including Waha, Texas, Katy, Texas and the Houston Ship Channel; and is used primarily in the company’s natural gas asset based trading activities. The company may transport volumes for third party shippers using the company’s available capacity in the future.
Cheyenne Connector, LLC, or the Cheyenne Connector is an interstate natural gas pipeline in which the company owns a 50% interest, which provides residue gas takeaway from the DJ Basin to the Rockies Express Cheyenne Hub, just south of the Colorado-Wyoming border. Tallgrass Energy is the operator of the Cheyenne Connector. The Cheyenne Connector is fully subscribed under long-term transportation contracts with the company and third party shippers.
NGL Fractionation Facilities
The company owns a 12.5% interest in the Enterprise fractionator operated by Enterprise and a 20% interest in the Mont Belvieu 1 fractionator operated by ONEOK Partners, both located in Mont Belvieu, Texas. The fractionation facilities separate NGLs received from processing plants into their individual components. These fractionation services are provided on a fee basis. The results of operations for this business are generally dependent upon the volume of NGLs fractionated and the level of fees charged to customers.
Storage Facilities
The company’s Marysville NGL storage facility, which stores ethane, propane and butane, is located in Michigan and has strategic access to Marcellus, Utica and Canadian NGLs. The company’s facility includes 11 underground salt caverns with approximately 8 MMBbls of storage capacity. The company’s facility serves regional refining and petrochemical demand, and helps to balance the seasonality of propane distribution in the Midwestern and Northeastern United States and in Sarnia, Canada. The company provides services to customers primarily on a fee basis under multi-year storage agreements. The results of operations for this business are generally dependent upon the volume stored and the level of fees charged to customers.
The company’s Spindletop natural gas storage facility is located in Texas and plays an important role in the company’s ability to act as a full-service natural gas marketer. The facility has capacity for residue gas of approximately 12 Bcf. The company may lease a portion of the facility’s capacity to third-party customers, and use the balance to manage relatively constant natural gas supply volumes with uneven demand levels, provide ‘backup’ service to the company’s customers and support the company’s asset-based trading activities. The company’s asset based trading activities are designed to realize margins related to fluctuations in commodity prices, time spreads and basis differentials and to maximize the value of the company’s storage facility.
Trading and Marketing
The company’s energy trading operations are exposed to market variables and commodity price risk. The company manages commodity price risk related to the company’s natural gas storage and pipeline assets by engaging in natural gas asset based trading and marketing. The company may enter into physical contracts and financial instruments with the objective of realizing a positive margin from the purchase and sale of commodity-based instruments.
The company’s NGL proprietary trading activity includes trading energy related products and services. The company undertakes these activities through the use of fixed forward sales and purchases, basis and spread trades, storage opportunities, put/call options, term contracts and spot market trading. The company’s energy trading operations are exposed to market variables and commodity price risk with respect to these products and services, and these operations may enter into physical contracts and financial instruments with the objective of realizing a positive margin from the purchase and sale of commodity-based instruments.
The company may execute a time spread transaction when the difference between the current price of natural gas (cash or futures) and the futures market price for natural gas exceeds the company’s cost of storing physical gas in the company’s owned and/or leased storage facilities. The time spread transaction allows the company to lock in a margin when this market condition exists. A time spread transaction is executed by establishing a long gas position at one point in time and establishing an equal short gas position at a different point in time.
The company may execute basis spread transactions when the market price differential between locations on a pipeline asset exceeds the company’s cost of transporting physical gas through the company’s owned and/or leased pipeline assets. When this market condition exists, the company may execute derivative instruments around this differential at the market price. The basis spread transaction allows the company to lock in a margin on the company’s physical purchases and sales of gas.
Customers and Contracts
The company sells its commodities to a variety of customers ranging from large, multi-national petrochemical and refining companies to small regional retail propane distributors. Substantially all of the company’s NGL sales are made at market-based prices.
Gathering and Processing segment
The company’s Gathering and Processing segment consists of a geographically diverse complement of assets and ownership interests that provide a varied array of wellhead to market services for the company’s producer customers in Alabama, Colorado, Kansas, Louisiana, Michigan, New Mexico, Oklahoma, Texas and Wyoming. These services include gathering, compressing, treating, and processing natural gas, producing and fractionating NGLs, and recovering condensate. The company’s Gathering and Processing segment’s operations are organized into four regions: North, Permian, Midcontinent and South. The company’s assets are positioned in certain areas with active drilling programs and opportunities for organic growth.
The company provides its producer customers with gathering and processing services that allow them to move their raw (unprocessed) natural gas to market. Raw natural gas is gathered, compressed and transported through pipelines to the company’s processing facilities. In order for the raw natural gas to be accepted by the downstream market, the company removes water, nitrogen and carbon dioxide and separate NGLs for further processing. Processed natural gas, usually referred to as residue natural gas, is then recompressed and delivered to natural gas pipelines and end users. The separated NGLs are in a mixed, unfractionated form and are sold and delivered through natural gas liquids pipelines to fractionation facilities for further separation.
The company owns or operates 36 active natural gas processing plants, including an interest in a plant through the company’s 40% equity interest in Discovery Producer Services, LLC, or Discovery. At some of these facilities, the company fractionates NGLs into individual components (ethane, propane, butane and natural gasoline).
The company receives natural gas from a diverse group of producers under contracts with varying durations, and the company receives fees or commodities from the producers to transport the natural gas from the wellhead to the processing plant. The company receives fees or commodities as payment for the company’s natural gas processing services, depending on the types of contracts the company enters into with each supplier. The company purchases or takes custody of substantially all of its natural gas from producers, principally under fee-based or percent-of-proceeds/index processing contracts.
The company actively seeks new producing customers of natural gas on all of the company’s systems to increase throughput volume and to offset natural declines in the production from connected wells. The company obtains new natural gas supplies in its operating areas by contracting for production from new wells, by connecting new wells drilled on dedicated acreage and by obtaining natural gas that has been directly received or released from other gathering systems.
The company’s contracts with its producing customers in the company’s Gathering and Processing segment are a mix of non-commodity sensitive fee-based contracts and commodity sensitive percent-of-proceeds and percent-of-liquids contracts. Percent-of-proceeds contracts are directly related to the price of natural gas, NGLs and condensate and percent-of-liquids contracts are directly related to the price of NGLs and condensate. Additionally, these contracts may include fee-based components.
The company enters into derivative financial instruments to mitigate a portion of the risk of weakening natural gas, NGL and condensate prices associated with the company’s gathering, processing and sales activities, thereby stabilizing the company’s cash flows. The company’s commodity derivative instruments used for the company’s hedging program are a combination of direct NGL product, crude oil, and natural gas hedges.
During 2022, total wellhead volume on the company’s assets was approximately 4.4 Bcf/d, originating from a diversified mix of customers. The company’s systems each have significant customer acreage dedications that the company expects will continue to provide opportunities for growth as those customers execute their drilling plans over time. The company’s gathering systems also attract new natural gas volumes through numerous smaller acreage dedications and by contracting with undedicated producers who are operating in or around the company’s gathering footprint. During 2022, the combined NGL production from the company’s processing facilities was approximately 421 MBbls/d and was delivered and sold into various NGL takeaway pipelines.
North Region
The company’s North region primarily consists of its DJ Basin system. The company has a broad network of gathering, compression, treating, and processing facilities in Weld County, Colorado that provide significant optionality and flexibility.
The company’s DJ Basin system delivers to the Mont Belvieu hub in Mont Belvieu, Texas via the Southern Hills, Front Range and Texas Express pipelines, to the Conway hub in Bushton, Kansas via the company’s Wattenberg pipeline, and Rockies Express Cheyenne Hub via the Cheyenne Connector.
Midcontinent Region
The company’s Midcontinent region primarily includes its Liberal system and South Central Oklahoma system. The company gathers and processes raw natural gas primarily from the Ardmore and Anadarko Basins, including the South Central Oklahoma Oil Province (‘SCOOP’) play and the Sooner Trend Anadarko Basin Canadian and Kingfisher (‘STACK’) play.
The company’s gathering system footprint in the eastern Midcontinent region, which includes the company’s South Central Oklahoma system, serves the SCOOP and STACK plays. Existing production in the western Midcontinent region, which includes the company’s Liberal system in the Hugoton Basin, is typically from mature fields with shallow decline profiles that the company expects will provide its plants with a dependable source of raw natural gas over a long term. The infrastructure of the company’s plants and gathering facilities is uniquely positioned to pursue the company’s consolidation strategy in the western Midcontinent region.
The company’s gathering and processing assets in the Midcontinent region deliver NGLs primarily to the Gulf Coast and Mont Belvieu via the company’s Southern Hills pipeline.
Permian Region
The company’s Permian region primarily includes its West Texas system in the Midland Basin, the company’s Southeast New Mexico system in the Delaware Basin, and the company’s James Lake System that has connectivity to both the Midland and Delaware Basins. Producers continue to focus drilling activity on the most attractive acreage in the Midland and Delaware Basins.
The company’s gathering and processing assets in the Permian region provide NGL takeaway service via the company’s Sand Hills pipeline, to fractionation facilities along the Gulf Coast and to the Mont Belvieu hub. The Guadalupe pipeline provides gas takeaway from Waha to Katy, Texas. Through the company’s ownership interest in the Gulf Coast Express pipeline the company provides additional gas takeaway in the region. In the third quarter of 2022 the company completed the acquisition of the James Lake System and a 120MMcf/d cryogenic processing facility that provides connectivity to the Delaware and Midland Basins.
South Region
The company’s South region primarily includes its Eagle Ford system, East Texas system, and the company’s 40% interest in the Discovery system.
The company’s Eagle Ford system delivers NGLs to the Gulf Coast petrochemical markets and to Mont Belvieu through the company’s Sand Hills pipeline and other third party NGL pipelines. The company’s East Texas system provides NGL takeaway service through the Panola pipeline, owned 15% by the company, and delivers gas primarily through its Carthage Hub which delivers residue gas to multiple interstate and intrastate pipelines.
The Discovery system is operated by Williams Partners L.P., which owns a 60% interest, and offers a full range of wellhead-to-market services to both onshore and offshore natural gas producers. The assets are primarily located in the eastern Gulf of Mexico and Louisiana, and have access to downstream pipelines and markets.
Regulatory and Environmental Matters
Safety and Maintenance Regulation
The company is subject to regulation by the United States Department of Transportation, or DOT, under the Hazardous Liquids Pipeline Safety Act of 1979, as amended, or HLPSA, and comparable state statutes with respect to design, installation, testing, construction, operation, replacement and management of pipeline facilities.
The company is also subject to the Natural Gas Pipeline Safety Act of 1968, as amended, or NGPSA, and the Pipeline Safety Improvement Act of 2002.
The company is in compliance in all material respects with the NGPSA and the Pipeline Safety Improvement Act of 2002 and the Pipeline Safety and Job Creation Act, and to the extent the company makes changes to its program to reflect the 2020 Act, the company expects to be in material compliance by the effective dates of the new regulations promulgated under the 2020 Act.
In addition, the company is subject to the requirements of the federal Occupational Safety and Health Act, or OSHA, and comparable state statutes, whose purpose is to protect the health and safety of workers, both generally and within the pipeline industry. In addition, the OSHA hazard communication standard, the Environmental Protection Agency, or EPA, community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in the company’s operations and that this information be provided to employees, state and local government authorities and citizens. The company and the entities in which it owns an interest are also subject to OSHA Process Safety Management and EPA Risk Management Program regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals.
FERC and State Regulation of Operations
Federal Energy Regulatory Commission (‘FERC’) regulation of interstate natural gas pipelines, the marketing and sale of natural gas in interstate commerce and the transportation of NGLs in interstate commerce may affect certain aspects of the company’s business and the market for the company’s products and services.
Interstate Natural Gas Pipeline Regulation
The company’s Cimarron River, Discovery, Cheyenne Connector, and Dauphin Island Gathering Partners systems, or portions thereof, are some of the company’s natural gas pipeline assets that are subject to regulation by FERC, under the Natural Gas Act of 1938, as amended, or NGA.
The company’s Guadalupe system and Gulf Coast Express pipeline are intrastate pipelines regulated as a gas utility by the Railroad Commission. Certain of the company’s systems are subject to FERC jurisdiction under Section 311 of the NGPA for their interstate transportation services.
Several of the company’s facilities in Texas, including gas processing, gas storage and gas pipeline and compression facilities have been deemed critical to the supply of electric generation and are subject to new weatherization rules implemented by the Railroad Commission.
With regard to the company’s interstate purchases and sales of natural gas, and any related hedging activities that the company undertakes, the company is required to observe anti-market manipulation laws and related regulations enforced by FERC and/or the Commodity Futures Trading Commission, or CFTC.
Certain of the company’s pipelines, including Sand Hills and Southern Hills, are common carriers that provide interstate NGL transportation services subject to FERC regulation.
Certain of the company’s pipelines have tariffs filed with the Railroad Commission for their intrastate NGL transportation services.
Environmental Matters
The company’s operations are subject to environmental laws and regulations relating to the management and release of hazardous substances, or solid or hazardous wastes, or petroleum hydrocarbons. These laws generally regulate the generation, storage, treatment, transportation and disposal of solid and hazardous waste, and may impose strict liability or joint and several liability for the investigation and remediation of areas at a facility or a location where hazardous substances, or in some cases hydrocarbons, may have been released or disposed. For instance, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, or CERCLA, also known as the Superfund law, and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a hazardous substance into the environment.
The company generates solid wastes, including hazardous wastes that are subject to the requirements of the Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state statutes. While RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. Certain petroleum and natural gas production wastes are excluded from RCRA’s hazardous waste regulations.
The EPA has also promulgated regulations that require the company to have permits in order to discharge certain storm water.
The United States Department of Homeland Security regulates the security of chemical and industrial facilities pursuant to regulations known as the Chemical Facility Anti-Terrorism Standards. These regulations apply to oil and gas facilities, among others, that are deemed to present ‘high levels of security risk.’ Pursuant to these regulations, certain of the company’s facilities are required to comply with certain regulatory provisions, including requirements regarding inspections, audits, recordkeeping, and protection of chemical-terrorism vulnerability information.
The Federal Water Pollution Control Act of 1972, as amended, also referred to as the Clean Water Act, or CWA, and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into navigable waters. Pursuant to the CWA and analogous state laws, permits must be obtained to discharge pollutants into state and federal waters. The CWA also requires implementation of spill prevention, control and countermeasure plans, also referred to as ‘SPCC plans’, in connection with on-site storage of threshold quantities of oil or certain other materials.
History
The company was founded in 2005. It was incorporated in 2005. The company was formerly known as DCP Midstream Partners, LP and changed its name to DCP Midstream, LP in 2017.
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