We have tried to compare the actual market prices VS what appears on the statements for years.  Some times close and sometimes no cigar to say the least.  I have come to discover that the gas companies will discount gas to commercial buyers and what they sell it is the price they will pay you.  So if see 3.57 listed on this site and they sell it 2.69 you can bet the ranch that 2.69 will appear on your statement.

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can you explain how you made your discovery?

also, can you elaborate on your use of the term "market prices"? i.e. how did you learn at what price your lessee was marketing at?

wj

Your Lease does not dictate the market value.  Your lease contractually dictates the % (Volume) of the gas that you will receive from your well. The total number of acres in the Plot and how many acres you have in the plot are the first part of the equation.

It boils down to your lease,  the volume (MCF) x times the market value, minus the deductions and "like magic" they send you a statement and a check. 

  If you look at the top right side of this page  it list the projected market value of Oil as well as Natural Gas.  There are a multitude of sources to check current market values of Gas as well as projections into the future.  The reality is that number (current market value) is rarely relative to the land owners.  You can wear yourself out looking to trend what they are going to pay you.  Bottom line all the data comes from the G C,  and there are NO checks and balances.  The statement includes market value, but it represent what the claim they sold it at......There are no "sales slips", so there is always that burning question of how honest they are.

The way I look at it, there are two groups that can bring the gas companies to task for disclosure, the State of PA or the lawyers.  SO that is a hell of a group to climb into bed with.  Who can you really trust the Gas Co? Government? or the Lawyers?  All THREE are going to cost you a lot of money.  The landowners are between a rock and a hard place

We have a well pad with 6 wells, Its been a five year process for us.  Not one day has been easy.  All I can honestly say about Shale Gas is that the first month is your best and its a sliding scale downward every month there after.........

You will find that disclosing sources on these web sites is a real good way to loose them.  My advice to you is NEVER disclose who or where you get inside information.  Getting solid information from the gas company is darn near impossible.  The G Men have a slew of lawyers working for them.  Negotiate and negotiate some more.  Do not let them bully you.  You did not state what your involvement is but good luck. 

the price for natural gas at the top of this page is an average weighted index for gas traded on the n.y. mercantile exchange at the henry hub in texas, not the "market price" for Marcellus or Utica gas. it's like the dow jones industrial average and does not reflect the price of nat gas in markets around the country. prices vary widely at times, and the nymex price is not a good source for tracking gas prices up here in the northeast.

over the past several years I have been paid based on prices higher, lower and almost the same as the nymex average. about the only relevant point to be taken from the nymex prices is the way that gas prices are trending.

you state that there are 2 groups that can advocate for mineral owners in their dealings with gas companies, but I would suggest that you are overlooking his most important advocate...himself. don't forget that mineral owners can audit to insure fairness and accuracy.

wj

W J seems you are right on the ball .Multiple markets exist throughout the country for the NG from the Marcellus (and others) .Depends on the spot price for the day and the market .Then they come up with an average .One thing though that most people don't know is pipelines are charging a transmission charge that comes out of the market price too .Those that want more info on it need to ask their company for an itemized statement showing the market it is sold to and the daily prices .Good luck on getting this info even though you are a partner in the deal.

The price listed on this page is indeed an average.  Just like gasoline, natural gas prices vary by region, largely the result of supply and demand.  The Wall Street Journal once a week lists a detailed record for natural gas prices, including by shale formation (not all NG comes from shale deposits).  I think it is in the Tuesday edition in the market section of the paper.  Marcellus Shale gas is consistently the lowest priced gas of all gas sources.  This is likely due to several considerations.  Marcellus gas is abundent in supply and is used to supply NY/Philadelphia regional needs.  Customers in these areas are seeing record low heating bills the past couple of years - the low cost is being passed on to customers.  In fact, last winter the Wall Street Journal ran an article on this issue, which concluded that the low cost of heating homes (majority of US homes heat with natural gas) has had a bigger positive economic impact on the US economy than the Obama fiscal stimulus effort.

A second factor for the low Marcellus prices is that most Marcellus is dry gas (currently a negative) and is also not close to the few processing facilities capable of liquifying it and selling it on the international market at market prices ($7-9 per million BTU's.).  Prospects for Marcellus gas prices remain low for the near future.   Either a few back to back artic winters in the NE US, the completion of a newly approved liquified processing plant which will be located so as to liquidfy marcellus gas, or the coming of gas fueled power plants in the next few years will positively impact prices.

Respectfully,

John Shorb

It would be my guess that I failed to clarify the issue properly.  I will take one more run at it. You are correct that most published market values are averages and indeed they can be regional.  The question again relates to the actual market value listed by your contractual gas producer on your statement. It was our statement market value vs any of the published market value out there that I was trying to establish or trend.  I would normally "average" 2or3 of the published MV and compare that to our statement MV which incidentally was almost always lower than the average. With that said I discovered that the statement value represented what my producer sold it for which was more often than not discounted to the "their buyer". 

As you stated there are a lot of reasons that drive the market up or down.  My thought process was to bench mark the going price in our region and compare that to our statement.  In a over simplification it would be to compare it the same way you could bench market the average price of a gallon of gasoline at the pump in a given area, to the station you would normally use. So it could be said that your guy is always 4% higher or lower than the average.

That was the primary reason I posted here, to find a publication that would provide a realistic average for the comparison.  I had a major player in the gas drilling operations in Lycoming Cnty tell me I was wasting my time in trying to bench mark that variance.  If that is a true our royalty checks can be anything they want it to be.  The only auditing process open to the land owner is math based on one set of numbers............theirs.

If your are comfortable with your statement, life is good.  If on the other hand you want to know what "drives the numbers" on your statement and everything is on the up and up you need a process that "rings the bell" if something  goes tilt.......................

it still isn't clear to me what it is exactly that you are saying in this thread.

in your opening post you said that you had discovered something. I took that to mean that you had uncovered some evidence of malfeasance on the part of your royalty payer(s), perhaps through an audit.

instead it seems that you are unhappy that your  royalties are based on sales prices that do not match market indexes from other areas of the country. that confuses me. it's like trying to compare apples and oranges.

the only index that can be used as a comparison to the prices on your royalty statement is the one closest to your area. even then, your gas may be sold at different prices depending on your payer's marketing strategy.

currently, Marcellus gas is trading at around $1 less than the henry hub price here in northeast pa. the biggest problem is that there is too much gas available, with too little pipeline capacity to move it to market effectively. it's a bottleneck. companies are scrambling to sell their gas into a buyer's market. we as mineral owners lose.

I am interested in knowing how you know that your producer is "discounting" their gas. that situation sounds like the one which resulted in the $400 million settlement in west Virginia several years ago.

while I won't go so far as to say that I am "comfortable" with my royalty statements, life is certainly good regardless. better than it would be without those monthly checks certainly, and i'm not inclined to lose sleep over things which cannot be proven. give me some evidence however, and i'm gonna sink my teeth into it like a junkyard dog.

afterall...what good is being a bazillionaire if you can't get a decent nights sleep for worrying that you've been cheated?

wj

Maybe this will help clarify.  Henry Hub is the largest natural gas Hub in N America, it is located in Louisiana, where many pipeline systems, 15+, intersect. High volume and wide logistical arbitrage opportunity make it the best national pricing point. Lessor hubs are priced premium or discount to Henry Hub. Henry is also the pricing point for NYMEX futures via contract specifications.

 

A NYMEX quote in the paper or Henry Hub spot (that days flow price) can be had if your gas can be flowed there. If you are in Lycoming or Clinton County, your pricing point is Leidy Hub, where a few lines intersect, including the Transco which flows from OH across PA and into NJ for NJ, NY use. If you are in Bradford County your pricing point is ZONE,TGP 300 line, a point on the TGP. Though if you are in the NE corner of Bradford, your gas goes north to the Millennium, which strews from Buffalo area E SE along the southern tier, turning southward near Hancock NY and into a distribution point in Rockland County.

 

Historically or Appalachia gas  sold at 20--40 cent premium(or way higher in a short squeeze) because shallow well output in,  NY PA, re not even a drip in a bucket. Today the Marcellus is over 10 billion Cu Feet per day and the market is having a very hard time placing it. This past summer Leidy and TGP300, sold for 1-2$ discount to HH. Hopefully in time this balances out, PA exported to Canada, re-routed from Warrington OH hub NW to IN ILL, exports.

 

While we are always suspicious of the gas companies, over done, once you are in production, most interests are mutual. The price the gas company sells the gas for is your prices s well. Ir isn’t priced to an index, it is THE price. Some companies sell a month’s worth all at once, some scale it out week by week, we have no control over those decisions. If you think you can outsmart the market you can play futures- good luck, pretty random.

 

Or in one word it is a matter of location.

http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/ng...

Thanks Melissa, it did give me a new direction on the market.  This continues to be a learning process.  Our pricing is the Leidy Hub  and I am pretty sure that Transco is close by.  As stated where your gas ends up will impact the sale price.  Our October Statement hit a all time low at $2.694.

Would you know where I could obtain more information on what geographic areas that the Leidy Hub would primarily serve?

The general consensus seems to be low demand and too much gas.  In our area given what I hear (no matter where I go) there is a growing belief that the gas companies are "working the numbers" in their favor.  Obviously there have been some class action suits that gives creditability to the fact that they are capable of doing so.  Their is so much information out there, and somewhere between A and Z lies the truth.

Gas inJjapan is 15$, Britian 9$.  LETS GET those export PORTS up and running.

I believe all units. Better since 2 expansions opened NO 1.

 

It really isn't the compnay but the MKT, over loaded.

I saw a graph somehwere a week ago showing 7 Bcf of expansions planned through 2016.

 

hey dennis. living the dream here, just like you!

all are currently low here, with some doing a little better than others. unfortunately, mine are the lowest prices than any others I've seen from chk, just the luck of the draw I suppose.

across the river, some got a little more, but in Wyoming county some got considerably more. Wyoming county gas may be going down to the Transco in wilkes barre.

wj

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