With natural gas liquids’ (NGLs) prices dropping for the most part and natural gas feedstock prices increasing at both Conway and Mont Belvieu, NGL frac spread margins were largely down at both hubs. The lone exception was ethane, which was up 6% at Conway and 1% at Mont Belvieu.

Propane margins had the smallest drop this week with the Conway margin down 2%, and the Mont Belvieu margin down 3%. The biggest drop in margin at both hubs was for iso-butane, which was down 13% at Conway and 10% at Mont Belvieu.

Iso-butane remained the most profitable NGL to make at Conway at US$1.18 per gallon (/gal) while C5+ remained the most profitable NGL to make at Mont Belvieu at $1.16/gal. The margin for Mont Belvieu iso-butane was $1.09/gal, while Conway’s margin for C5+ was $1.12/gal.

Butane was the third most profitable NGL to make at Mont Belvieu with a margin of 89¢/gal. A combination of a stronger propane price and a weaker butane price at Conway resulted in propane moving to the third most profitable NGL to make at the hub with a margin of 85¢/gal. Conway butane had a margin of 83¢/gal while Mont Belvieu propane’s margin was 84¢/gal. Ethane’s frac spread margin remained the smallest of any NGL at both hubs, as it was 33¢/gal at Conway and 43¢/gal at Mont Belvieu.

Natural gas in storage for the week of January 29 was down 115 billion cubic feet to 2.406 trillion cubic feet (Tcf) from 2.521 Tcf, according to the most recent data available from the U.S. Energy Information Administration. This was 9% greater than the 2.207 Tcf storage level recorded last year at the same time and 7% higher than the five-year average to 2.256 Tcf.

The U.S. National Weather Service’s forecast for the coming week indicates the cold front that is ripping through the Northeast to continue with much colder weather than normal for February to run all along the Atlantic Coast, through the Midwest and Gulf Coast and into parts of the Southwest. Warmer weather than normal is expected for the Pacific Coast and into other parts of the Southwest. – Frank Nieto

Current Frac Spread (Cents/Gal)

Date: Feb. 11, 2010

Conway

Change from

Mont

last week

Belvieu

last week

Ethane

70.40

79.93

Shrink

37.33

37.13

Margin

33.07

5.81%

42.80

1.23%

Propane

136.64

135.50

Shrink

51.57

51.30

Margin

85.07

-2.37%

84.20

-3.22%

Normal Butane

141.18

146.77

Shrink

58.38

58.07

Margin

82.80

-9.48%

88.70

-11.21%

Iso-Butane

174.00

164.32

Shrink

56.07

55.78

Margin

117.93

-13.36%

108.54

-9.63%

Pentane+

174.73

178.45

Shrink

62.44

62.10

Margin

112.29

-6.31%

116.35

-5.21%

NGL $/Bbl

51.72

0.33%

52.63

-0.35%

Shrink

20.57

20.46

Margin

31.16

-4.20%

32.18

-4.67%

Gas ($/mmBtu)

5.63

8.06%

5.60

7.28%

Gross Bbl Margin (in cents/gal)

71.77

-4.24%

75.70

-4.52%

NGL Value in $/mmBtu

Ethane

3.88

6.99%

4.40

3.95%

Propane

4.74

1.32%

4.70

0.50%

Normal Butane

1.52

-2.97%

1.59

-4.71%

Iso-Butane

1.08

-7.45%

1.02

-4.52%

Pentane+

2.25

-1.63%

2.30

-1.21%

Total Barrel Value in $/mmbtu

13.48

1.08%

14.01

0.26%

Margin

7.85

-3.40%

8.41

-3.93%

Price, Shrink of 42-gal NGL barrel based on following: Ethane, 36.5%; Propane, 31.8%; Normal Butane, 11.2%; Isobutane, 6.2%; Pentane+, 14.3%, Fuel, frac, transport costs not included. Conway gas based on NGPL Midcontinent zone, Mont Belvieu based on Houston Ship Channel.

Shrink is defined as Btus that are removed from natural gas through the gathering and processing operation.