I’ve got a few mineral interests in Oklahoma and Texas. Mostly gas wells. Some of the checks I’m getting are still paying gas prices below $2.00 for November and December. I follow the spot prices pretty regularly hoping they will get to a decent price. I thought prices had risen to above $3.00 a couple of months ago but surely above $2.00. I pulled up a chart of Henry Hub prices and it showed it finally got back above $2 in September and above $3 in December. Is this a reliable source of the price for Texas and Oklahoma? Or is it not relevant? If so, what would be a more reliable source of the price I should be getting paid for? Thank you in advance for any help. I read this site and appreciate all the advice that is given.
Gas pricing is rather frustrating and difficult. It primarily depends on location, which translates to pipeline takeaway capacity, distance to markets, well pressure, gas quality, operator size / strength to negotiate a good gas sales agreement, etc.
Prices vary even within one state or county. Two operators running wells side by side can have totally different prices. Gas prices are much more “local” in nature than oil. Henry Hub is often a unicorn in my experience. I think there are advantages for gas being close to the gulf coast (Henry Hub) but may also depend on gas purchase agreements (which will take into consideration the transportation and operational cost of the pipeline). In the Panhandle region, my wells are paid on a smoother curve than Henry Hub. Less monthly fluctuation. Sometimes higher than HH, sometimes lower. I’ve never found good local gas pricing sources that are available without a paid subscription.
Another problem is, some gas prices reported is actually just the net price after deductions - but doesn’t show the actual deductions. So the real gas might have been $4 but your check only shows $2. Other companies will report $4 and then show all of the deductions with a net of $2. It’s difficult to compare apples to apples when everyone has their own flavor of accounting transparency (or lack thereof).
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Chuck70- there are several things that go into the price of NG as shown on your revenue statement. Not all gas is created equal. A couple of factors are BTU, contracts & pipeline capacity or availability. The “Hub” prices are a general price only and are for gas delivered to the HUB, after passing the wellhead & processing plant. The provisions of the lease can also play a big part of the price received. Unfortunately, if we aren’t the operator, we have to grin & bear it and be thankful we have an additional source of income.