Replies to This Discussion

Permalink Reply by The_Baron on October 1, 2009 at 6:31

We now have record gas in storage.

And climbing.......

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Permalink Reply by The_Baron on October 1, 2009 at 6:32

see the time?

the time on the futures is when the quote was posted, but on the spot it shows the strike date.

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Permalink Reply by ken hatcher on October 1, 2009 at 6:58

When it's full do they flare the well's ?

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Permalink Reply by David on October 1, 2009 at 7:29

While I am not an expert like others, flaring gas would only be "throwing money away" for the producer; not to mention the royalty owner. They would be better off shutting it in; they could at least sell it at a later time.

But do not expect the latter. Expect prices to continue to declining unless some persistently cold weather sets in this winter.

Baron, Skip... would you agree?

Permalink Reply by Grillin' - MmmMmm on October 1, 2009 at 11:08

As storage starts to fill, two things occur. First, the owners of the storage start to restrict the volumes they will take. So pipelines cannot put all of their excess into storage. This starts to "fill up" the pipeline system, resulting in higher operating pressures going back up the line. As the pressures in the systems go up, wells flowing against the pipeline pressure start to flow less, since the flow equation is related to the pressure of the system.

Second, as storage starts to fill and the storage operators start to take less gas, the pipeline companies also stop taking as much gas from producers. They tell the producers that they can't take as much and the operators are forced to either find an alternative (which there aren't any of) or shut in the wells. Flaring is generally not allowed for any considerable amount of time, by the regulatory folks and in some cases the royalty owners.

Permalink Reply by The_Baron on October 2, 2009 at 3:01

I would expext to see some shut ins, not because of price but because of pipeline and storage curtailments.

Permalink Reply by The_Baron on October 2, 2009 at 3:04

Flaring is usually only done in the case of well testing before the pipeline is hooked in. Also, it was common bcack when gas was very cheap for excess casinghead gas to be flared from oil wells, some was used to power onsite equipment, the rest flared.

Permalink Reply by Scott on October 1, 2009 at 13:02

Baron,

Do unhedged working interest owners receive the same price as the royalty owners?

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Permalink Reply by adubu on October 1, 2009 at 15:48

Scott--Yes the price of gas is related to the contract negoitated by the operator of the well, unit or possile multiple wells to who ever they are selling the gas to. In this area it is transported by pipeline rto the Henry Hub in La. They receive a gross price then net out after expenses. The WI will pay their share of expenses and receive net. The royalty owner receive same net or better the wellhead gross price and pays no expenses to get the gas to market depending on lease terms signed. When O&G companies hedge the price of gas by selling futures they will receive all gains nothing to the royalty owners and on same royalty owners to not pay any losses since we are not at risk. The Henry Hub price is not to penny what royalty owner receive. We get something less because there is the middle man in marketing that take %. Most contract are price for the month farward usually during the first of the month, so you can get ideal what you will be paid for oct gas by looking at HH spot 1st week avg . The HH close at $2.92 today. La get higher price than east texas because closer to the hub less expense to transport. So I guess payment ffor Oct gas that will be paid on Dec check will be ~ $2.70 mcf to royalty owners.

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Permalink Reply by RBH on October 5, 2009 at 17:29

is anyone following weather trends. It seems with the storage situation and over capacity that weather--lot's of cold weather would help. I do not understand why the gas curve is contango versus FLAT..is it optimism built into it. It does look like the future vs. spot differential has increased quite a bit.

Permalink Reply by RBH on October 5, 2009 at 17:32

NATURAL GAS ($/MMBtu)


PRICE* CHANGE % CHANGE TIME
Nymex Henry Hub Future 5.00 .01 .28 00:09
Henry Hub Spot 2.86 .54 23.28 10/05
New York City Gate Spot 3.14 .61 24.11 10/05

from the Bloomberg site 10-5-09 another one to look at is www.nymex.com
http://www.nymex.com/ng_fut_csf.aspx

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