We lease in Colorado County/Texas and occasionally our lease payments contain an amount for plant sales. What are those and how are they defined?
The simple explanation is that when gas comes out of the ground it is usually a blend of several kinds of gas. It is transported to the gas plant to strip out the components such as methane, ethane, propane, butane, iso-butane, condensate, etc. Each of those have their own price point. A good example would be a dairy. Raw milk goes in and skim milk, 2% milk, butter, etc. come out.
Thank you! I surmised it would be something related to post production but wasn’t sure.
You may find the condensate reported as oil. Some companies do that.
The post production charges will show us (hopefully) as individual lines such as marketing, transportation, compression, etc.
Great point - we are currently leasing our Texas gas and oil tracts to Petrodome - they’re the the fourth group we’ve allowed since over a decade ago and we’re pleased with their work and on-time payments. I may ask them to include a breakout of the plant costs on future production statements and see where we go. Thanks again - I appreciate the info and help!
If you only have methane that is dry with no gas liquids, you may not have anything to report other than the methane. Some companies roll their plant products into their gas amounts if the volumes are small. Just depends upon the company.