US total liquids production averaged 16.58 mb/d in July, up m/m by 0.37 mb/d and higher y/y by 2.4 mb/d. This was a much larger increase than we had expected (+0.1 mb/d), with crude production outperforming expectations by 0.23 mb/d and NGLs by a smaller 80 thousand b/d. Crude production increased m/m by 0.29 mb/d to 10.97 mb/d, a record high, up y/y by 1.73 mb/d. The m/m increase was driven, once again, by a large ramp up in Gulf of Mexico (GoM) production, which rose by 0.19 mb/d m/m to 1.85 mb/d. This increase, along with the strong recovery seen in June after April-May maintenance, points to significant improvements made during the maintenance period in addition to the ramp up of the 40 thousand b/d Kaikias field, which started early production in May. The 80 thousand b/d Stampede project continues to ramp up and is expected to reach 40 thousand b/d by end-2018, while Chevron’s 75 thousand b/d Big Foot project is expected to produce first oil in Q4 18. We also note that gas production in the GoM has been ramping up as well, indicating that activity is on the rise. Due to this resurgence in GoM production, we are raising our total 2018 US liquids production y/y growth forecast by 0.1 mb/d to 1.84 mb/d, with GoM growth at 25 thousand b/d.
Onshore production was broadly in line with our forecasts. Texas and New Mexico (a proxy for the Permian and Eagle Ford) output rose by 59 thousand b/d m/m to 5.14 mb/d—a significant slowdown from the 0.17 mb/d m/m growth in June—as pipeline constraints began to put pressure on growth. Indeed, major service companies have said growth has been slowing. More recently, frac-sand producer Hi-Crush temporarily idled its Whitehall dry plant due to softness in completion activity and frac sand demand. However, Midland differentials have strengthened significantly over the past few weeks as linefill for the Sunrise pipeline expansion starts. Differentials were as wide as -$17.50 at the start of September but closed yesterday at -$6.38. This pipeline will allow growth to pick-up modestly in the Permian over the next few months and perhaps sooner than the Q1 19 expectations provided during investment calls. But once the pipeline is full, growth will be constrained again until the EPIC and Gray Oak pipes begin later in 2019, unless the EPIC NGLs pipeline is converted to crude for a year sometime in Q2 19.
Production in Oklahoma and Kansas (a proxy for the Anadarko basin) was up by 16 thousand b/d m/m to average 0.64 mb/d (higher by 0.10 mb/d y/y), after falling for the previous three months, although NGL and gas takeaway constraints remain. Output in Wyoming and Colorado (a proxy for Niobrara) grew by 24 thousand b/d m/m to 0.67 mb/d, higher by 0.12 mb/d y/y. Bakken output rose m/m by 42 thousand b/d to 1.27 mb/d. Offsetting some of this growth, Alaskan production fell m/m by 56 thousand b/d as summer maintenance continued.