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Natural Gas Price Comparison by Producers



Started March 18, 2017 at 10:56 am by @K22 in GoMarcellusShale

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K22
03/18/17 10:56:20AM
@k22

For the last two years, I have been tracking the natural gas prices ($/mcf) we have received our gas producers compared to the Henry Hub price.  I will show that information in a subsequent post since you apparently can't attach files to the first post in a discussion.  Anyway, I would like to compare what other producers are paying.   I know that the prices vary depending on the location but that would be interesting information as well.  We are located in Belmont County, Ohio.  There are currently nine producers with wells in this county.  Please indicate which month of production the price covered and who the producer was.  Please also indicate which county and state your well is in.  I would have posted this in the Belmont County Group but that group doesn't have much participation. 

K22
03/18/17 10:59:14AM @k22:

Here is the gas price information I mentioned above.


Skip Peel - Independent Landman
03/18/17 11:29:03AM @skip-peel-independent-landman:

Over on GHS we've been comparing prices by operator for years.  Most of our gas never makes it to Henry Hub, it is sold at a number of sales points.  Those points do price off of Henry, usually at some discount to the prevailing HH price.  If you wish to compare based on a hub price, pick the closest one.  There can be great variation in price and many factors come into play.  The Marcellus/Utica has been plagued by take away capacity and connection to major markets.  That is slowly being remedied but it does generally make MidWest/NE hubs less than Henry.  Some times significantly so.  After much trial and error our solution was to compare prices between operators by a limited, defined area.  In our case, the best comparable was prices by fields.  This tends to make prices comparable because the gas required the same treatment and for the most part used the same transportation grids.

Use this link to get a better understanding for hub pricing and how gas is marketed.

https://www.ferc.gov/market-oversight/mkt-gas/overview.asp


Leo Schumacher
03/18/17 12:41:39PM @leo:

Does your data do any comparisons with prices at the wellhead for each field?


frank speaker
03/20/17 03:28:18PM @frank-speaker:

What would you say are reasonable and usual costs of post production?


R. Dennis Xander
03/18/17 11:55:47AM @r-dennis-xander:

I think this is an interesting comparison. However, I looked at the Henry Hub data you provided and it doesn't seem to correlate to the published data I track.  See attached, which contains monthly Henry Hub, TCo, DTI and Tetco M2 pricing going back several years.  Hope this helps. 


pdf
GasPriceInfo.pdf  •  68KB

K22
03/18/17 12:21:56PM @k22:

Dennis, the information you have is for settlement prices of futures contracts on the NYMEX exchange.  My data is for the monthly average spot price at Henry Hub.  My information comes from the government's US Energy Information Administration.  You can see the data at this website: 

https://www.eia.gov/dnav/ng/hist/rngwhhdm.htm

Anyway, I'm still hoping to hear from others from Belmont County Ohio.


R. Dennis Xander
03/18/17 12:39:08PM @r-dennis-xander:

Ok!~  I am uncertain as to whether or not these companies actually sell their gas based on daily spot prices. In my experience, the settled price is generally more commonly used, but I am not certain of that.... There are lots of ways to sell gas.  That said, actual prices will be closely tied to the transmission lines involved. So I think it is probably better to compare actual prices received to the TCo, DTI, M2 and other indices, and I think they tend to be settled prices.


K22
03/18/17 01:39:45PM @k22:

Dennis,    The futures settlement price represents just that one day.  The spot price I am using for Henry Hub is the average spot price for the whole month.   Also,  I am not trying to equate the price that my producers are getting in Ohio with Henry Hub.  I am only using the Henry Hub price as a reference because it is readily available.  The actual price that producers get depends on where they are located and which regional market they are selling into.  Those prices can be higher or lower than the Henry Hub price depending on supply and demand in that area.  That is why I would like to see what other producers in Belmont County, Ohio are getting.


R. Dennis Xander
03/18/17 02:08:11PM @r-dennis-xander:

We agree that Henry Hub is meaningless here. I remember the "good old days" when I sold gas on DTI for an average premium of 50 cents to Henry Hub in 2008, based on the DTI index. In 2016, the basis was as low as -$2.07 (negative!) in October.  Quite a shift!  The TCo, DTI, M2 and other indices may be the best basis for comparison with actual prices received. A *lot* of Appalachian gas is sold under contracts tied directly to these indices (not Henry Hub).


frank speaker
03/20/17 03:22:12PM @frank-speaker:

My well is in Harrison County, but I would think they trade through the same hubs. I'm guessing that they use the Dominion South or the Tennessee Zone 4 or the Leidy hubs. You can also get these prices at the EIA website for each day, and then average them for the month.


frank speaker
03/20/17 03:31:49PM @frank-speaker:

Correction: they publish for the week ending on each Wednesday.


Dan Warner2
03/18/17 12:43:38PM @dan-warner2:

Tyler Co. WV - Jay-Bee Production - $1.07

This is up from a low of $0.89


Leo Schumacher
03/18/17 12:59:50PM @leo:

Is this the price Jay-Bee received or the price upon which Jay-Bee paid royalties?  I did not believe it was the price Jay-Bee received


beezlenut
03/21/17 10:38:52PM @beezlenut:

That is the price that my royalties are calculated from, according to the check stubs.  With no deductions taken, I have to assume that this is the point-of-sale price.  As I understand it, the gas is piped to the Mobley station in Wetzel County.  

The price is for gas sold three months previous, and jumped to $2.40 this month (for December sales).


Leo Schumacher
03/22/17 10:56:47AM @leo:

For all of 2016 Jay-Bee's prices were about 1/2 of the Henry Hub and Nymex Futures.  Why did the price suddenly spike in December?


beezlenut
03/22/17 11:34:29AM @beezlenut:

Good question.


Skip Peel - Independent Landman
03/22/17 11:48:38AM @skip-peel-independent-landman:

Cold weather.  Winter was late in coming for many but I think more typical winter temps showed up in December, 2016.

https://weather.com/forecast/national/news/back-to-back-arctic-cold-blasts-midwest-east-december-2016


Leo Schumacher
03/22/17 12:06:10PM @leo:

The Nymex and Henry Hub prices did not change, only the price determined by Jay-Bee changed.  The correlation between the indexes and Jay-Bee pricing has been horrible the last few years.  Initially, the correlation was tighter, at about 67%, but the last two years the correlation has fallen to about 33%.  I have a spreadsheet that shows the correlation between index pricing and Jay-Bee pricing since its wells went into production.  It does not appear to me that the colder weather would cause the change in the correlation between the pricing components.


beezlenut
03/22/17 07:55:14PM @beezlenut:

I'd be interested in seeing that spreadsheet.  I haven't had time to track it, but my attorney raised an eyebrow when I mentioned it to him.  He suggested that I read the Tawney case.  Take from that what you will.


Leo Schumacher
03/24/17 11:32:15AM @leo:

I have a non-disclosure agreement with Jay-Bee, but it is my understanding that price data is excluded from the agreement.  Signing bonus and royalty percentage cannot be disclosed, but pricing should be public information as it pertains to all lease holders, AND it is used in the calculations of the unfair property tax bills we receive for wells in productivity.  I can post my spreadsheet, which contains Nymex monthly, Henry Hub monthly, and Jay-Bee monthly, and does a comparison.  First I would appreciate other's thoughts to verify this data is not confidential.


Kyle Nuttall
03/28/17 11:41:28AM @kyle-nuttall:

If it's the non-disclosure language in their lease it should only apply to what's in the lease.  I don't think pricing data should be covered by that.  The actual language of the non-disclosure agreement would be controlling, though.


HB2
03/18/17 02:32:16PM @hb2:

Ascent Resources in Belmont County:  9-16($2.37); 10-16($2.59); 11-16($2.48); 12-16($3.29).


R. Dennis Xander
03/18/17 03:02:29PM @r-dennis-xander:

Just curious... Is this the month you received the check or the actual production month?  Some of these companies are three and four months back, and there should only be two months between production month and payment.  With the recent volatility in price, getting the months right is essential to figuring this out.  Look at recent DTI indices:

Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017
$0.8800 $1.1200 $2.4000 $3.3300 $2.9800 $2.0600

HB2
03/18/17 03:39:09PM @hb2:

Those were prices on the statement for the month it was sold.  Checks are about 90 days in arrears.


R. Dennis Xander
03/18/17 04:48:33PM @r-dennis-xander:

Those are good prices! Just a little under TCo for three months and above TCo by 22 cents for 12/16!~


HB2
03/18/17 07:15:36PM @hb2:

Aye.  I'd have to look at the lease again to remember how they determine what price to use for Royalties.  It was a very good lease.


John OBrien, landowner advocate
03/19/17 09:33:10AM @jobla:

The landman for Eclipse has told me that "Eclipse has made deals to hedge their sales price to $3.75"  How will that affect royalty?  Does it mean that royalty will be paid at that rate regardless of actual sales, and how could that strategy benefit them in the future?  Keep in mind that they are courting me for a lease.


K22
03/19/17 09:40:39AM @k22:

Yes, the gas producers hedge their gas prices.  But they won't hedge your share of the gas sales.  Your royalties will be based on the spot price at the point of sale.   Sorry.


Skip Peel - Independent Landman
03/19/17 09:42:29AM @skip-peel-independent-landman:

Royalty interests are not paid based on a company's gas hedges.  Those are financial agreements beyond the contractual agreements between lessors and lessees.  The lessor will get the price at the point of sale regardless of the fact that it will differ from the hedge price.  Lessors always would prefer to get the hedge price when it is greater than the point of sale price but what about when the hedge is less than the point of sale?  Hedging is a means to manage risk.  Sometimes it pays off and sometimes it costs companies money.  What a hedge position will do, especially one at $3.75 this year, is allow a company to continue drilling wells even though the actual physical price of gas falls far below that price.


Darrell Weaver
03/19/17 05:49:45PM @darrell-weaver:

How does this play out if your lease has the verbage a percentage of the profits. I would say then you would get the hedge price...?


Skip Peel - Independent Landman
03/19/17 05:57:09PM @skip-peel-independent-landman:

Nope.  As far as I know no lease language would get you the hedged price.  But look on the bright side, when energy companies' hedges go bad, and they do, you will not be penalized. 


Perrylkeaton
03/23/17 09:34:58AM @pete:

i would say with that verbage you would be prone to every deduction that could be thought of even down to road maintenance


Jules Bartlett
03/19/17 10:29:06PM @jules-b:

On 2/27/17, National Fuel Investor Relations sent possible pricing for Pomfret, NY.  I think we're one of the Tennessee Zones:

Tennessee Gas Zone 4 Station 219 ($2.11 /MMbtu today)

Tennessee Gas Zone 4 Station 313 ($2.07 /MMbtu today)

Dominion - North ($1.94 /MMbtu today)


Perrylkeaton
03/23/17 09:42:46AM @pete:

marshall county republic/ eqt

nov--2.20   dec--2.79  jan--3.94


Bluflame
03/24/17 01:06:22PM @bluflame:

Belmont County, wet gas zone, GPOR, month of sale by GPOR, NG $/MCF, Liquids $/gal

        Oct16    Nov16     Dec16

NG    $2.15    $1.86      $2.73

Liq.   $.54.     $.51.       $.63

The 3/28 Royalty Check will be for 1/2017 sales. 

I hope this is helpful. This is a good thread.

BluFlame


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