Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Dominion Resources, Inc. (D), Gulfport Energy Corporation (GPOR): Another Energy Company Gets Bit by the Infrastructure Bug

Photo credit: Markwest Energy Partners LP

Oil and gas production in the U.S. is booming. Energy imports are down to the lowest level since 1991. However, as good as production has been, it could have been much better. The problem is that we simply cannot build the infrastructure required to get that production to market fast enough.

The latest victim of this problem is Gulfport Energy Corporation (NASDAQ:GPOR). It recently announced that its third quarter production would be in a range of 12,250-12,750 barrels of oil equivalent per day, or BOE/d. That’s about 16% less than its guidance range of 14,000-15,000 BOE/d. The good news is that the company isn’t changing its production guidance for the year as it expects to have the current problems ironed out.

Gulfport Energy Corporation (NASDAQ:GPOR) pointed out that its production is being adversely affected by pipeline infrastructure delays. Specifically, it said that its Irons 1-4H well, which was scheduled to begin flowing into a sales pipeline last month, won’t begin flowing into sales until the end of next month. Its midstream partner Dominion Resources, Inc. (NYSE:D) has experienced pipeline infrastructure and permitting delays. On Gulfport Energy Corporation (NASDAQ:GPOR)’s last quarterly conference call it noted that Dominion Resources, Inc. (NYSE:D) was late getting the line complete, but it has now taken much longer than expected.

Infrastructure issues really have been a recurring theme this year for smaller producers in emerging shale plays. For example, Magnum Hunter Resources Corp (NYSE:MHR) experienced similar problems last quarter in the Marcellus shale. The company’s production on the quarter would have actually been 12% higher if it wasn’t for a combination of pipeline and liquid handling issues. Magnum Hunter Resources Corp (NYSE:MHR) has since resolved all of its issues, but the risk does remain that infrastructure growth won’t keep pace with production growth.

Midstream providers, however, cannot be criticized for these issues. Operators like Dominion Resources, Inc. (NYSE:D) are spending heavily to build the infrastructure that producers need. Dominion Resources, Inc. (NYSE:D) has even entered into a joint venture with its Utica assets in order to develop the business into a major midstream operator in the Utica shale region. The agreement provided the business with outside capital so it didn’t have to compete with Dominion Resources, Inc. (NYSE:D)’s other major projects for capital.

Another midstream operator in the region is Markwest Energy Partners LP (NYSE:MWE). The company, which works with both Magnum Hunter Resources Corp (NYSE:MHR) and Gulfport Energy Corporation (NASDAQ:GPOR), is rapidly scaling up in both the Marcellus and Utica shale plays. In fact, it has completed 16 major projects in the region while another 22 are currently under construction. It’s basically building projects as fast as it can.

There are two important takeaways for investors. First, if an independent oil and gas company reduces its production guidance due to infrastructure issue,s it’s nothing to worry about. It’s just a temporary problem that will eventually get sorted out. Further, these issues highlight how critical midstream companies are to the process, which is why it’s not a bad idea to invest in a midstream provider. The bottom line here, the U.S. energy boom that will continue to be choppy, but there is no end in sight for the growth boom.

The article Another Energy Company Gets Bit by the Infrastructure Bug originally appeared on and is written by Matthew DiLallo.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!