Replies to This Discussion

Permalink Reply by adubu on September 4, 2012 at 14:20

Churn---- gas prices will be variable to location of well and distant it has to be transported to market and which Broker the operator sold the gas to. Many time price set on a certain day of the month for month forward. It will not be the spot prices on Henry Hub. In general your prices will be 30-50 cents or more below prices you see in the paper. This is reason you like to negotiate "Royalty Free Gas" in your lease. Many many variables--- your prices much lower than most and is due most likely to CHK business dealing with their royalty owners --- search and read details on CHK and prices that Henry did a long study research on.

Permalink Reply by jffree1 on September 4, 2012 at 16:05

Churn, listen to adubu.  There are all sorts of things like where the gas is sold into the market, what sort of treatment is needed before being marketable, etc... and I know our gas is sold below Henry Hub and probably a little below Carthage.  Some operators use Houston Ship Channel price.  Just lots of variables that would make it different from whichever price you are comparing to.  I quit watching the spot price when it hit $2 so I'm no help.

Permalink Reply by andy d on September 5, 2012 at 8:27

Churn and I signed the same lease and we have "free gas" negotiated. In fact, there are no deductions listed on the check stub so all is correct there. I wonder if they are selling to an owned or friendly intermediary at artificially low prices only to remarket in the new entity and pocket the arbitrage  

Permalink Reply by Churn on September 5, 2012 at 11:56

My lease states that I will not be responsible for any production costs.  Now if that means Royalty Free Gas, your point is correct.  But this morning when I read adubu and jffreel's comments, I was thinking that Royalty Free Gas wasn't the same thing.  Maybe they can clarify this for us.  The PRICE listed on the check stub is the amount that I was questioning.  And apparently I've been listening to the wrong quotes for Natural Gas prices.  You know they are going to get us one way or another.  And again, it's "pennies from heaven".  I never expected to see a dime.

Permalink Reply by Churn on September 6, 2012 at 8:50

I just talked on the phone with Chesapeake.  They say that the "price" of the gas that is listed on the check stub is determined by the quality of the gas, the distance that it has to travel in the pipeline to the sale point, and the purchaser of the gas.  They said that production costs refers to the cost to acutally get the gas to the wellhead.  So, the drilling and all that, I assume.  She also told me specifically that every lease in the unit is not worded the same and does not have the same terms of agreement.  She did not know what "Royalty Free Gas" was.  She referred to the information that she had, put me on hold, and still could not find that term.  Hope this helps.  Jffreel and Adubu, please correct me if I'm wrong or am missing something.  And thanks for all you help.

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