landowner

BTU Value

Would someone explain the BTU value and how it relates to the price O/G companies pay royalty owners for natural gas. What's a low and high BTU value?  Does a low BTU value mean a royalty owner is paid less for the gas... lower than market price?  Some companies include the BTU value on the monthly pay stubs... some don't.  I've been looking over pay stubs from various O/G companies that show BTU values... same production month... no deductions other than taxes... but widely varying  prices paid for nat gas... some differ as much as $1.30.  i know i've asked many questions and i'm well away answers can be difficult to explain.  thanks!

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Oil & Gas ProPermalink Reply by Les Bamburg on January 25, 2011 at 16:35
JHH, natural gas is sold by producers on a thermal Btu basis and their sales price would be $/MMBtu.  At a gross heating value of 1000 Btu/Scf, one MMBtu (million Btu) would be the same as one Mcf (thousand cubic feet of gas).  Most royalty statements show pricing on a volumetric basis of $/Mcf and the statement should include the Btu factor (MMBtu/Mcf) that was used in converting the gas price.  

landownerPermalink Reply by JHH on January 25, 2011 at 16:41
Les B, thanks... i'll need time to take that in.  i talked to one O/G company who said they do not... will not include BTU factor on statement... and would not give it to me if i asked for it in writing and would not tell me how they came up with the factor... or how it changes from day to day or month to month or over a year's time.  my brain is almost dead.  will check back tomorrow.  thanks.  jhh
Permalink Reply by Chad E Ellis on January 26, 2011 at 16:50
In a nutshell, the higher the BTU the higher the price.  For example, most Haynesville wells are around 995 btu and Cotton Valley wells can be 1100-1300 BTU.  The price received for the Cotton Valley gas will normally be higher than that of the Haynesville gas.  This is because there are more higher chain hydrocarbons (ethane, propane, butane) in the CV gas that drives up the BTU's.  You are seeing some operators in the fringe areas of the shale switching to Hz CV wells because of this and the increased amount of condensate (oil) that come from the CV.  I've seen the 1.30 spread on some of my properties where the CV (1200BTU) and HV (995BTU) wells are about 200yds apart.  I'm very familar with my gas marketing agreements and can understand this spread.

landownerPermalink Reply by JHH on January 27, 2011 at 2:28
That's what i thought.  But getting an O/G company to discuss the wide range for the price for gas with the same or very close BTU factor and only taxes taken as deductions is like stealing state secrets.    thanks jhh
Permalink Reply by Chad E Ellis on January 27, 2011 at 3:03
The market that the company sells to also can vary.  These contracts are closely held to the vest.  I have some gas that sells to Carthage hub and some that sells to Houston Ship Channel.  Most of it depends on the location of the well and the available pipelines that are close by.  Different pipelines deliver to different markets.

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