Our outlook for integrated gas companies is getting rosier as more U.S. oil and gas producers ramp up drilling plans for 2010 and drive up demand for midstream and pipeline services. Integrated gas companies such as El Paso EP, EQT EQT, Questar STR and Williams Companies WMB have multiple pathways for growth from exploration and production (E&P) to midstream to pipeline businesses. These firms have ample drilling inventory in low-cost or emerging fields, and healthy portfolios of midstream and pipeline projects.
El Paso plans to spend $4.1 billion in 2010, allocating $2.9 billion for pipeline projects across the U.S. and $1.1 billion at the E&P unit to ramp up drilling and develop emerging gas shale and oil properties. El Paso and its master-limited partnership subsidiary, El Paso Pipeline Partners EPB, built a pipeline project backlog across all regions that topped $8 billion with customer contracts in place. This gives El Paso reason to expect 8% annual EBITDA growth from 2010 to 2012. The firm has also amassed a large E&P portfolio, and plans to ramp up drilling at Haynesville Shale and Eagle Ford Shale properties in Texas, and oil-rich Altamont properties in Utah. The firm plans to grow oil and gas production by 10% each year from 2010 to 2012, based on its inventory of drilling sites.