Replies to This Discussion

Permalink Reply by John on October 30, 2008 at 2:59

The best place to track natural gas futures prices on a daily basis is the nymex.com (New York Mercantile Exchange)

John

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Permalink Reply by Clay on October 30, 2008 at 3:18

This one is the best that I have found.

http://quotes.nasdaq.com/aspxcontent/commodities.aspx

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Permalink Reply by The_Baron on October 30, 2008 at 3:49

Keep in mind that the price you see on TV or from the commodeties exchanges are futures.

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Permalink Reply by The_Baron on October 30, 2008 at 3:51

Also, the price for natural gas can vary depending on who is buying the gas. Remember royalties are paid on the price at the wellhead, not the final market.

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Permalink Reply by The_Baron on October 30, 2008 at 4:53

It is my understanding that in LA is is illegal to hedge the royalty owners gas w/o their written permission. The RO would receive the prevailing price at the wellhead on "their gas", while the O&G could hedge "its gas".

However, care should be taken in the lease to try and get a "cost free royalty" to prevent the RO from being charge for compression, gathering, transportation, etc...

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Permalink Reply by Iris on October 30, 2008 at 5:41

So much good info ....I thought it was a simple question. I have a problem tho I'd rather read these comments than clean house. PS my house is really messy.

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Permalink Reply by Wayne on October 30, 2008 at 9:43

If you want to know the CASH price on a daily basis for natural gas (not the NYMEX futures price) you need to go to ICE.

https://www.theice.com/marketdata/naNaturalGas/naIndex.jsp

There are many trading points listed on ICE but the general area applicable to the Haynesville shale is GULF/TEXAS.

Also, the prices listed on ICE are all at the MAINLINE. Very few natural gas wells are connected to a mainline. Most are connected to a gathering system that gathers, compresses, dehydrates, etc. the gas before it enters the mainline and the operator of the well has to pay the operator of the gathering system a fee for those services. Therefore, if you see a mainline price of $6.00/MMBtu listed on ICE, keep in mind that another $0.50-$1.25/MMBtu will probably be deducted from that price as a gathering fee.

Clear as Mud?

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Permalink Reply by The_Baron on October 30, 2008 at 10:38

The landowner will be paid the fair price minus gathering, dewatering, compression, etc. unless their lease states otherwise. The gas is not a marketable product until it is ready for the main pipeline system.

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Permalink Reply by Les Bamburg on October 30, 2008 at 17:53

Baron, I am not sure those costs are deductible since they are operating costs. Federal and state royalty calculations only allow costs required to move gas to the pricing point (ie pipeline transportation) to be deducted as part of the netback pricing calculation.

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Permalink Reply by Wayne on October 30, 2008 at 10:48

Whooh, I never said the gathering company was a subsidary of the lesee or anything like that.

I was trying to answer the lady's question of how to find out what the cash price of natural gas is.

Now, as far as your comments about subsidaries and pipeline prices.

Facts are that most of the gathering companies are NOT owned by the people that are drilling the wells. Nor are they affiliated with the companies drilling the wells. Most gathering companies are owned by independent third party companies.

Another fact is that interstate pipeline companies don't buy natural gas. They quit doing that in the late 80's and early 90's. They only transport natural gas for a fee now.

As far as your question about what a landowner is entitled to be paid royalties on--well that depends on the lease language involved.

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Permalink Reply by Les Bamburg on October 30, 2008 at 17:56

KB, gas is not physically transported to the Henry Hub in South Louisiana. Pricing is merely based on the NYMEX gas futures contract settlement price with some differential.

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Permalink Reply by Les Bamburg on October 31, 2008 at 17:12

KB, no problema! Believe or not most foreign companies and consultants think all gas in the US flows thru the Henry Hub. In reality less than 1 Bcfd of physical gas actually moves thru the Hub. This is the reason companies rarely settle the NYMEX contract with physical gas.

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