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Permalink Reply by Skip Peel - Mineral Consultant on May 1, 2012 at 3:20

Gary, are you referring to the monthly settlement price?

http://gsfi.net/common/NYMEXSettlementHistory.pdf

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Permalink Reply by Gary Eidsness on May 1, 2012 at 3:27

Yes I think I was reading a discussion and someone replied the only price to follow is the expiration price for May published on thursday?

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Permalink Reply by Skip Peel - Mineral Consultant on May 1, 2012 at 3:33

That might be Les B.  The subject is in his area of expertise.

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Permalink Reply by Gary Eidsness on May 1, 2012 at 3:35

Thank you for your time.

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Permalink Reply by Mattie on May 1, 2012 at 5:31

Gary,

The May expiration price is the most closely representative indicator of what price you'll get paid for May production......less all appropriate (and/or inappropriate) deductions for pipeline "basis" and gathering,treating, compression, etc. that your operator applies.  

Insofar as the longer-term view, the current month NYMEX settlement can also set a "tone" and "direction", albeit sometimes short-term, for future months.  However, just as important (if not more important) to the longer-term outlook is the forward curve (NYMEX settlements for 1+ years out).  You can review the entire NYMEX strip for 2012-2013 and beyond to get a sense (in layman's terms) of any change in trader sentiments.  A good example of the forward curve's importance is the amount of "financial coverage" it provided in 2009-10, and up until the past 12-18 months, for producers to hedge at least 2+ years out from current month.  Producers were able to "lock in" $1-2 premiums above the prompt (current month) settlement price.  That "forward curve" kept O&G companies (and rigs) active in the NG market.  Once the "forward NYMEX curve" flattened to <$1 above current month prices, limited opportunity is available to protect existing production or incentive to drill for NG.

I agree with Les and Max that the market is going to need a lot of "lift" from fundamental changes (mainly power generation and exportation), but that won't happen overnight....maybe 2 years away....but, if the forward curve starts to jump, you'll see some O&G companies jump to "hedge" while they have a chance to do so with at least some of their inventory.....providing some upside for drilling budgets & cash flow, but the hedging activity will again pressure the NYMEX curve back downward....or, at least, keep it from "spiking".   The short-term volatility does help, though, if for no other reason to give an uplift to the "options" market.... another financial tool for producers to get some premium value (above market) for their gas.        

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