Why are the gas prices I see on the New York stock exchange and Henry Hub higher than what is on my check stub? I have a no cost lease.
Where are your minerals? The local market is quite influential to gas prices.
Plus the prices on your check stub were the prices two months ago.
My minerals are in the hansvile shale. Panola co. I am comparing with the correct month. For example July stub says 3.36 Henry Hub says 3.84. some few dollars difference. Thanks for answering my post
There are a few things that could be happening.
Most all leases are “cost free” but typically that language refers to not paying any capital or operational expenses. Gathering and marketing expenses are dependent on the lease, and Texas law usually interprets all but the best language as having to pay your share of gas pipeline and plant fees.
Panola should receive pricing close to Henry Hub since it’s so close, but gas contracts that define the price a 3rd party pays the operator are usually based on a certain index price (or basis differential), such as WAHA for West Texas, Dominion South and others for Appalachia, and likely an East Texas hub for your area. This is where your mineral’s local supply and demand make a huge impact. A $0.30-0.70 cent basis differential is relatively common, but it’s not fixed by any means. WAHA was so negative two years ago that gas cost money to sell, and now that proper pipelines are in place it’s actually slightly positive most days. Weather also affects most areas pretty strongly.
- Prices on stubs can be BTU adjusted. I normally see the product price before the BTU adjustment, but I have seen it after. Your gas is priced based on the heating value of the gas, and the Henry Hub price assume 1 MMbtu. Rich unprocessed gas ~1.4 mcf/mbtu and processed gas (with accompanying plant products) will be closer to 1.0 mcf/mbtu. Some processed gases will have so many high BTU components removed that the adjustment is below 1.0 mcf/mbtu.
Gas is a very hard commodity for a mineral owner to double check with just public data sources and without the gas contract and plant statements.
Thanks again for your help. I have had to do battle with this company before. Thought we were getting shorted on acres. After a couple of lies I hired an attorney. Sure enough I was correct. Sad but not a lot of trust. I figured if the price doubled my check should as long as the volume is the same.
NatGas prices vary enormously by market, recently gas in UK and Asia are double digits vz $5 in the US. Our gas royalties in west Texas (WaHa price) always trail Henry Hub by 10%, the differential was far worse a few years ago before new pipelines opened up and pipeline constraints improved.
If you search on the web, you can find posted prices for various terminals in your specific area. There can be variance, even within the Haynesville Shale area. The trick is to know which hub your operator is selling into.
If the prices you are being paid are still below those posted prices, then it is time to investigate for improper payments. Also, most people are paid based on a weighted average of prices received for the month, so you have to consider that also. In other words, don’t take the posted price on the last day of the month and assume that is the price that should be on your check.
Thank you. I’m gonna make the call and dig deeper. Found some 3 dollar differences also. Appreciate all of your info. Very helpful
I have done some research and Henry Hub and the lng’s on the coast are the two places it would go. So the L G N terminals would be even higher than Hub. So is it safe to say I should be getting close to H H prices at least?
You may or may not get prices close to Henry Hub. It all depends upon the contract that your operator has with the carrier, any hedges that are in place, weather conditions, time of year, if your lease allows post production charges, etc.
Hi, No post production cost. I have 7 wells. the price is close on some of them. Not so much on others. For example Feb. payed 2.60 and H H was 5.26. I have a question I hope someone can answer. Shouldn’t the volume reported to the RRC be the same on my check report? Thanks for the help. Seems like I never will learn all this.
Gas is hardly ever the same amounts on the RRC vs check stub. Gas is back calculated. Should be in the general neighborhood. Some companies report at the wellhead for the RRC and check reports on sales which are at the plant tailgate. Line loss along the way, plant products are stripped out, etc. My checks tend to have lower volumes due to those and other factors.