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Permalink Reply by Armstrong Land on October 25, 2013 at 7:55am

That figure would be in the gathering / transportation agreement your operator has negotiated with DTI.  Not public record nor is it a standard rate.

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Permalink Reply by Tony Yurina on October 25, 2013 at 9:49am

Some companies show this as a line item on their quarterly financial reports.

You can bet it will be the industry average of 75 cents or higher per Dekatherm for gas gathering/compression/processing, etc.  I have seen as high as $1.39 .  Cost deductions can take a big bite out of a 20% royalty. 

New infrastructure costs dearly to build and initially operate, the first wells connected can get hit hard with these expenses.

When the misdstream asset gets fully loaded and somewhat depreciated, those rates should moderate some, but that amount is a future unknown. 

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Permalink Reply by Armstrong Land on October 25, 2013 at 2:26pm

Tony:

I don't believe you are correct on the above.  Typically the rate is contractual and escalates based on some inflation index and does not depend on the age or capacity of the midstream asset.  Additionally, how can we state what the average cost is when these contracts are proprietary?  Every dekatherm is not equal - should the production contain C3+ hydrocarbons the deduction will be greater as the stream will require processing / fractionation.

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Permalink Reply by Tony Yurina on October 25, 2013 at 7:46pm

Armstrong,

I disagree.  

Every dekatherm is equal, that is the national standard.  

Every cubic foot of gas at its sampled and analyzed Btu value is converted to Dth for standardized billing/trading. Therefore the cost is equally and fairly applied to each and every cubic foot gathered, compressed, processed, sold etc. regardless of company or well under contract in the same midstream system.  

You are supposing that gas that does not need processed is somehow magically bypassed around the processing plant, and the gas that is processed is routed through the plant and that cost is more?  This is not possible.  Either all the gas is processed or it is not, that is the typical midstream operation for high Btu marcellus and Utica.  The pipeline companies will not take out of tariff specification gas.

Either all the gas is processed or it is not once co-mingled in a high Btu midstream system. (less C1 and higher percentages per cubic foot of C2, C3, C4, C5, C6+ Hexane, Heptane, Octane, this is heavy wet gas that is in the 1,240 BTU / CF range.) 

EQT publicly posted their midstream gathering costs during the third quarter financial report, take a look.  Others have publicly made their fees known.   Some guard the cost to  hide information and refuse transparency.   

There may be some proprietary information regarding affiliate companies transferring custody of the product, this point I do not disagree with you on.  

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Permalink Reply by Judy Gatrell Cooper on October 25, 2013 at 1:32pm

Has anyone been successful in getting JB to change this clause in a lease?

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