What is the typical difference between the price of gas "at the wellhead" versus the price of natural gas that we see on the stock exchange?
I believe we are paid on the price at the wellhead, correct?
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Price at the wellhead is not nessarilly tied to an index like the Nymex.
The Nymex price is what futures traders are paying for delivery at a later date. The "Wellhead price" is what the operator recives from the pipeline operator, or buyer downstream. Depending on your lease, you may have additional deductions.
Example. I drill some wells, build a gathering system and tie into a salesline owned by joe-bob. joe-bob will buy my gas, which will be less than the nymex set price, because he will sell the gas for delivery to someone else. Or worse, he will sell to another pipeline and give me even less money.
Thanks for the replies.
If anybody is involved in a 50-50 deal between Shell and Encana, do you know how much typically below the wellhead rates have been from the NYMEX?
Bobby, the daily NYMEX natural gas prices you see quoted have little or no connection to wellhead gas prices. The final settlement price of the NYMEX contract will give a better indication of wellhead price once appropriate deductions are applied. The final NYMEX contract settlement price occurs 3 business days before end of the previous month.
For example during June you would see daily quotes of the July NYMEX contract but the only valid value was the final settlement price of $4.357/MMBtu. The other daily values really mean nothing for royalty owners.
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