NG spot prices hit triple digits for weekend delivery

[wrs + 893]

At these prices you make in a day what you made the previous month. Some payback for negative rates in previous years.

 

 

https://www.naturalgasintel.com/weekly-natural-gas-prices-soar-as-polar-vortex-unleashes-brutal-cold-on-u-s/

 

Edited February 14, 2021 by wrs

[J.R. Ewing + 19]

Who usually benefits from these crazy premiums - operators, pipelines or someone else?

[wrs + 893]

19 hours ago, J.R. Ewing said:

Who usually benefits from these crazy premiums - operators, pipelines or someone else?

Not sure, I will know in a couple of months how much we got paid for the gas.  I suspect it's the ones that can put the gas in the pipeline which is operators and storage facilities.  Of course the pipelines do too but not as much I don't believe.  We have never seen this before.

[Michael Dunn + 1]

I sure hope you’re right. 

[J.R. Ewing + 19]

This article makes me optimistic about seeing some good numbers on my February checks - https://www.worldoil.com/news/2021/2/12/record-cold-brings-a-windfall-for-small-us-natural-gas-producers

 

[Otis11 + 551]

 

On 2/14/2021 at 2:00 PM, J.R. Ewing said:

Who usually benefits from these crazy premiums - operators, pipelines or someone else?

Depends heavily on how the contracts are written... 

I'm used to mineral owners opting to take their portion as cash after sale, in which case the gas gets sold along with the producer's gas and they get the same price as the producer. (The other way I encounter is a flat royalty, where the mineral owner gets paid $x/MMBTU. Much less common, but not never. Theoretically the owner could opt to sell it themselves, but I've never seen anyone take this option.)

Then you get to how the producer sells it. What I'm used to is that we expose ourselves to the spot price and pay a midstream company to transport it. That means the midstream gets a flat rate (or, in our case, a variable rate tied to external factors put through an equation to determine the rate - not tied to the actual price. At least in the cases I deal with.)

So in this break out, the producer gets the windfall (and mineral owners for the ones that chose that payment method). And since they're the one's that get to ramp production, it has the desired effect of incentivizing getting people out there to get those wells opened up again after they froze over.

There are cases where the midstream company actually buys the gas at a given rate and then they are the ones exposed to the spot price... but that's much less common in my experience. In this case the midstream company would get the windfall. 

[wrs + 893]

Our leases are priced at the wellhead so whatever the price for that day is, we get.  The key here is that apparently a lot of wells were frozen off and so could not produce and some pipelines were frozen and so gas could not flow into them which may have caused some wells to be shut in temporarily.  I haven't heard anything from my operators and won't know until production data comes out in another month.

[J.R. Ewing + 19]

Fingers crossed that everyone gets some good news soon on their February nat gas checks.

I just got my first from an EOG unit in Gonzales Co, TX.  Average price on gas was $12.03 which was up from $2.81 in January.

Nat gas production was down 42% (likely from wells/lines freezing up) but gross revenue was still up 145%.

Small dollars on this since it's just associated gas but hopefully everyone sees similar or better price increases.

If you assume consistent production throughout the month and normal prices the other 3 weeks of February, EOG was averaging about $40 the week of the polar vortex.

Edited April 10, 2021 by J.R. Ewing