From WSJ: Natural gas prices drop 4% to close at $2.1850/mmBtu, the lowest closing price since May 27, 2016 and the largest one-day decline this month, after the EIA reported a larger-than-forecast 115-billion-cubic-feet rise in storage for the week ended June 14.
“For the sixth consecutive week, the EIA has reported a triple-digit injection. This is the first time this has happened since 2014,” says Austin, Texas-based Drillinginfo. “With the summer’s peak demand season just around the corner, don’t expect the triple-digit injections to hang around much longer. As power burn ramps up in July and August, some of the gas that is currently being injected into storage will need to be used to meet power burn demand.”
July Monthly Settlement Price: $2.291
The price I was paid for April on my royalty check from XTO was more then ten percent less that the settlement price for April.
You may have addressed this in earlier postings, but is yours a "cost free" lease?
Could be worse - I just saw a revenue statement from the Delaware Basin where the gas is not being paid for at all (at least it wasn't a negative price). But the gas is still being produced so as to extract the NGL's at the plant and get the oil / condensate from the separator on location.
I wonder what a royalty statement looks like at negative natural gas prices. I hope none of our members ever have to find out. Do you think the operator includes a return envelope to make it easier for the lessor to send in a check for the negative royalty interest? :-)
I wonder what the ratio of gas to condensate was on those? If the well was drilled for the liquids and not the gas and it was put in the agreement I guess you get what you get.
The Permian wells are oil wells. Most oil wells produce some natural gas. Rock Man might be able to expand upon what areas of the Permian Basin produce the most gas and NGLs. I see a lot more industry focused articles on the bottle neck for natural gas transport than I do ones on NGLs. I do occasionally see articles on new Permian NGL pipelines. Whether the NGL profits make up for the low or sometimes negative natural gas prices is above my paygrade. The bottom line for most of us is the coming increase of natural gas supply headed to the same Gulf Coast markets where Haynesville and other LA and E TX gas is sold.
Gas vs oil wells depends where you are in the Permian Basin - and varies in both the Midland and Delaware Basin. Well types go from oil with very little gas to gas wells with hardly any oil.
Look up Apache's Alpine High area - this is their core in the Delaware Basin and is essentially all gas and NGL's from multiple horizons.
I saw a news items last month that over 2 BCF of gas PER DAY is flared in the Permian Basin. So all that revenue (and associated NGL's) is lost . At $2.50 per MCF, that is around $5 Million per day of lost gas revenue. Excluding NGL value.
There are multiple bottlenecks for pipeline take away in the Permian as all of you are aware - that is why over 20 new large pipelines for gas, NGL's and Oil / Condensate are in the process of being planned, permitted and constructed to bring those products from the Permian to the Tx Gulf Coast (mostly Houston and Corpus end points).
There are also limits in the Permian for processing plants to strip out NGL's from produced gas (since most gas pipelines will not take NGL rich gas into their systems). The "zero" gas payment is tied to the overload of gas going into these processing plants - companies are willing to basically "give away" any residue gas in return for the NGL's that are produced (although those prices have been down a lot recently).
The WAHA processing facility (one of the largest in the Delaware Basin - which is more gas rich than the Midland Basin) was actually posting a "negative" gas price for residue gas earlier this year.
Question for all to consider - once these new pipelines are in place and the Permian gas and liquids are not "bottle necked" in the near future, what will be the impact on other gas producing play areas?
I think it's quite obvious that they will fall on their face until demand can prop it back up.
PS to my note above:
The 2 BCF per day of flaring is not just the Permian Basin - it is the combined flaring from the Permian Basin and Bakken Plays (North Dakota). Note that this will normally be very high NGL yield gas (i.e. 100 to 300+ bbls NGL per MMCF of gas).
The Permian Basin flaring is nearing a 700 MMCF per day rate compared to under 300 MMCF per day a few years ago.
I just wanted to update this for accuracy. Sorry for the initial error.
No operator (and this one is OXY) will enter into an area for expensive horizontal drilling with the concept of not getting any revenue off of the gas stream. The Board of Directors would be thrown out for such planning.
The massive drilling efforts in the Permian have created the present day bottlenecks - and mid stream companies are working hard to build the infrastructure to eliminate these bottle necks (see my other post on this issue in this same thread)..
To specifically answer your inquiry, these wells come on at around 1.5 to 3 Million CF of gas per day with 300 to 600 BC/BO per day. High gas ratios.