Received an amendment from Apache today wanting me to sign off on allowing them to stop production on our wells when Waha prices reach $0 or less. On its face seems like a wise move. Plant products have barely been offsetting the negative NG prices for the past three or four months for us. Assuming others will be getting these amendment requests soon.
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You should have any lease amendment reviewed by an attorney as the wording is critical. Waha prices are not readily accessible to the public. How is pricing defined - price is zero or price less expenses is zero? Is there any limitation, such as number of months of zero pricing? If it is a lease amendment, then it will last for the lifetime of the lease. It means that Apache does not have to pay shut-in royalties. Consideration depends on whether your wells are truly gas wells, with little oil production, or whether your wells are really oil wells with accompanying gas as that is the difference between well profitability. This might be a good idea for existing gas wells, to extend the life and your royalties, but you may not want it to apply to any future oil wells under the same lease. That said, a lot of Apache wells are located where there is primarily gas production and there is not other leasing activity. Interesting proposal and lots to think about.
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In our case, the wells are not producing any oil. Just NG and plant products. The GD Waha Index Price is there source. If that fails to be published they reference the Southwest heading of the PGD. We are considering having a lawyer look at it, but these wells have been producing revenue (as opposed to product) so little the last 3-4 months would hate to squander too much on a lawyer.
I would sign it. Matterhorn coming online, hopefully this is a passing phase (well at least until capacity fills up again).
I despise my gas being sold at negative prices. I’d much rather be shut in and wait for better prices.