Are You Paid Fairly for your Wet Gas Liquids?



Started April 10, 2017 at 09:13 pm by @Dott in GoMarcellusShale

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Dott
04/10/17 09:13:24PM
@dott

Do you have a well in the Wet Gas area of Ohio and do you feel that you are being paid fairly? Over the years I have mostly seen posts from people who feel they are being cheated but rarely from people who feel they are being fairly compensated.  I am looking for those who are happy with their royalty checks so that I have some hope going forward.  Doing some research it seems like the excuse the Producers have is that the constituents in Wet Gas cannot be divided out easily for an accurate price and so it is lumped together with everything else and then paid on the everything else which can sometimes bring a lower price for the royalty owner.  Please feel free to post here or contact me privately.  If you can share some numbers with me that would be great.  Landsman quote on the high end $1,000.00 an acre per month for Wet Gas liquids.  I don't believe it.  From what I have read on this site it is closer to zero.  Also I know it depends on the location of the Well but does much oil or gas come up with the Liquids to give you a good price per acre even though you don't get much for the liquids?

Perrylkeaton
04/12/17 09:36:08AM @pete:

they usually do a monthly gas  sample that gives you the btu of the gas and the amount of liquids per mcf of the gas as well as constituents in the gas. now getting hold of this is another matter in its self. with current prices royalty works out to about 150 an acre per month on a 20% lease


Dott
04/12/17 02:27:05PM @dott:

Pete, Thank you for your reply. Given the lack of replies I guess no one is excited about what they get paid in the wet gas area.  What you have confirmed for me is what I have read in past posts of the amounts royalty owners truly receive. 


Perrylkeaton
04/12/17 04:30:52PM @pete:

the big thing is if your lease does not require payment for nothing but gas/oil
then that is all you will get paid for--the oil and gas companies get paid on the mmbtu of per mcf of gas as well as all the liquids separated from that stream of gas, like the ethane,butane and such--so watch them when they are paying you $2.70 an mcf and they are raking in $4.60 an mcf. I wouldn`t know exact numbers but marcellus gas holds around 5.2 gallons of liquid per mcf of gas !!!


jnm
04/14/17 08:05:02AM @jnm:

The last couple of months I have received between .327 and .402 pr gal for NGL.  There was a stretch a year or so ago that I was receiving a NEGATIVE amount on the NGL. They were actually taking away from the oil and gas royalties!


Dott
04/14/17 01:40:47PM @dott:

Thanks JNM.  I spoke to my O & G Lawyer the other day and he thought that as there are new demand for liquids and more plants are built that the prices will go up.  That is encouraging.


Sylvester Deal
04/16/17 09:33:41PM @sylvester-deal:

Dott,

Natural gas (1200-1300 BTU/Mcf and higher) must be processed at extreme cold temperature (-60F to -120F) to liquify the ethane, propane, butanes and natural gasoline from the gas stream, generally leaving the gas stream with a small percentage of ethane and about 1100 BTU/Mcf for sell into an interstate pipeline (mandatory specification).  There is a processing fee on the gas stream plus transportation & fractionation cost paid on the liquids, and a final price differential for each component (usually negative) is applied to NGL hub Mont Belvieu TX prices.

Current hub prices run 20-25ct/gal ethane, 65-70ct/gal propane, 80-90ct/gal butanes, and $1.10-$1.20/gal natural gasoline.  Post processing costs and differential can run 40-50ct/gal, so the final total value depends on the mix recovered from the gas stream.  So the biggest part of the gas stream after methane is ethane and propane, with current prices ethane is a loss due to cost and propane is marginally profitable before considering gas processing costs.  Butanes go into gasoline in winter months, but not summer (mid winter prices for butanes were higher than natural gasoline for a while).  Any product that can be processed and sold regionally will garner more value (lower transportation cost), however current propane demand is for export from the Gulf Coast or Philadelphia.

NGL market is highly variable and prices are more dependent on crude price rather than natural gas price and followed by demand as the final determinant.  As JNM mentioned, early last year NGL prices were depressed, by low crude oil prices, Jan2016 NYMEX price averaged ~27/bbl compared to $50/bbl range now.  Ethane demand is Gulf Coast and Sarnia Ontario, new cracker plants for ethylene production may increase the local value eventually. 

The EIA publishes an average NGL composite price based on monthly reported plant production (weekly estimates).  The current number is $6.36/MMBtu  (MMBtu = million BTU, also 1 dekatherm DTh).  This is helpful comparing NGL prices to natural gas price.  A million BTU is equal to 14.5 gal ethane, or 11 gal propane, or 10 gal butanes, or 8.7 gal natural gasoline.  If your royalty check gives you a breakdown for components these numbers may help.


Dott
04/16/17 09:57:08PM @dott:

Thanks for all of the information Sylvester. I have a no deduction lease HOWEVER, I have the Market Enhancement Clause which begins with HOWEVER (which is never good).  Anyhow it seems to me that with NGL's the O&G company will certainly use this clause to take deductions because is seems like a lot needs to be done to it in order to sell it.  Am I correct?  Is this also true for OIL? And how about GAS?


Sylvester Deal
04/17/17 07:00:27AM @sylvester-deal:

Dott,

Oil no, but some instances require addition of chemicals and heat to break out water and sediments to a salable level, not a problem for the M/U that I have heard.  Natural gas is the usual gathering, compression, and transportation cost.  When a discovery has hydrogen sulphide, and/or extreme levels of carbon dioxide another type plant would be necessary to process and make gas stream salable.


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