Hello I was wondering if anyone out there that looks at the market value at Henry Hub and thinks why am I getting paid 3.75 when the Hub price is above that? all the the way up to 7.00 dollars for the month of Jan.??? pope jean lease, Hansville shale.
HH is for spot pricing. The greatest majority of gas is sold on a contract basis that is determined using several factors.
Thanks for answering . So if the market is say 4.35 at HH and stock market price. Mine could still be 3.75? The way I read it I should be getting somewhere in the $ Neiborhood of the hub it is recieved at.
The wellhead volume will not be the ultimate sales volume. First, there is line loss as the gas moves in the pipeline from the well to the plant. Gas from one or more wells will enter the line going to the plant at Point A. Other gas will enter at Point B or C etc. Compressors will be located at various points along this pipeline and those compressors use the well gas to operate and keep the gas flowing. The gas usage of the compressors is allocated proportionately among the wells based on the volumes at Point A , Point B etc. The further your well is located from the plant and the more compressors it goes through, the more gas loss will be deducted. Basically, the gas entry volumes are measured at each Point and added together and then the reduced gas volume at the plant is measured and difference allocated back to each well based on distance, number of compressors used and a few other factors. Second there is loss of gas volumes during the plant processing as some gas is consumed. Third, the plant will be paid for processing by either a share of liquids and/or gas or by a cash fee. That is how it makes money. More often, gas sold at the plant tailgate, which may not be as far as Henry Hub or other hub. Sales are priced in mmbtu, rather than in mcf. If gas is sold further down at hub, there could be some additional line loss. You need to see the plant statement for a lot of information, including mmbtu and mcf numbers. It is possible that the operator is selling to its own subsidiary at a below market price. Chesapeake was known for this, at least in the past.
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How do I go about getting the plant records? Thanks for all ya’ll help.
That is not public information. You will have to request from operator. Many operators will not provide this information unless it is required under the terms of a lease or the mineral owner is conducting a formal audit. Your attorney can maybe help you with a request.
Hello again . Can someone tell me if it’s unethical or illegal for the operater to be purchaser also of my gas. when they are paying below market value?
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