(Bloomberg) — Canada’s Gibson Energy Inc. is betting that increased oil production in the Permian Basin will fuel continued growth in U.S. crude exports, boosting profits from a major Gulf Coast terminal that it bought last year for about $1.1 billion.
The acquisition of the South Texas Gateway Terminal – which expanded Gibson beyond its core business of storing and processing Canadian crude in Alberta and Saskatchewan – is seen by analysts as a key earnings driver for the company. Although Gibson plans to generate more revenue from the terminal through physical improvements and improved contracts, the deal also represents a macroeconomic bet on growing U.S. oil exports.
On that front, CFO Sean Brown believes analysts are becoming more optimistic about the Permian’s long-term oil production, even after consensus forecasts for the region’s daily output rose to 7 million barrels, versus an expected previous level of around 6.5 million barrels.
“We think it will certainly translate into export momentum,” Brown said in an interview last week at the Bank of Montreal and Canadian Association of Petroleum Producers energy symposium in Toronto. “We believe the United States will continue to increase its exports as it seeks to meet global crude demand that continues to rise.”
Permian crude production has increased over the past year. The Permian’s production outlook has been buffeted by questions of well productivity and by drillers’ plans to slow growth and return more cash to shareholders. The field is expected to produce about 6.17 Mb/d in May, according to U.S. government estimates. That’s down from December’s peak of 6.22 million, but still double what it produced just over six years ago.
Gibson’s Gateway facility extracts oil from the Permian and Eagle Ford basins and loads it onto very large crude carriers for export, with a licensed capacity of 1 million barrels per day. The operation was the second-largest U.S. oil export terminal by capacity and accounted for about 12% of U.S. exports in 2023, prior to the announcement, Gibson said at the time of the deal.
Gibson is working to sell additional loading windows to move the facility from around 80% contracted to the industry standard of around 90% and is attempting to shift the contract mix to more VLCCs from Aframax vessels smaller, which would increase volumes moving through the terminal,” Brown said. The company also sees an opportunity to increase on-site storage and dredging to deepen the waterway, he said.
“We are very optimistic about our ability to continue to grow the facility,” Brown said. “We see a significant path toward what we believe will be attractive growth in the relatively near term.”
Main image: Flared natural gas is burned in the Permian Basin in Garden City, Texas. (Photographer: Spencer Platt/Getty Images)
