Mont Belvieu natural gas liquids (NGLs) frac spread margins were more improved this week than their Conway counterparts, although the two largest margin improvements for any single NGL were both recorded at Conway.

The Conway ethane margin was up 10% and the Conway butane margin increased 6% from the previous week. The largest margin increase at Mont Belvieu was for butane, which rose 4%. The largest decrease in margin at both hubs was for propane, which was down 3% at Conway and 2% at Mont Belvieu.

The most profitable NGL to make at both hubs was C5+ at US$1.29 per gallon (/gal) at Conway and $1.27/gal at Mont Belvieu. This was followed, in order, by iso-butane at $1.07/gal at Conway and $1.17/gal at Mont Belvieu; butane at 94¢/gal at Conway and $1.01/gal at Mont Belvieu; propane at 78¢/gal at Conway and 77¢/gal at Mont Belvieu; and ethane at 29¢/gal at Conway and 41¢/gal at Mont Belvieu.

Natural gas in storage finally seems to have worked off its excess volumes due to the frigid winter experienced throughout the country. For the week of February 19, the most recent data available from the U.S. Energy Information Administration was down 172 billion cubic feet to 1.853 trillion cubic feet (Tcf) from 2.025 Tcf reported in the previous week. This represented a 3% decline from the storage level of 1.909 Tcf reported last year at the same time and is just 1% greater than the five-year average of 1.840 Tcf.

However, just as this overhang has been worked off, the frigid temperatures have exited from the highly important Northeast corridor where temperatures have been normal for this time of year. The U.S. National Weather Service is predicting this region to experience warmer than usual weather. These temperatures will extend into the Great Lakes region with the Mid-Atlantic and much of the Midwest experiencing normal late winter temperatures. The Southern and the Rockies’ regions are expected to help keep demand up somewhat as temperatures are predicted to be colder than normal. – Frank Nieto

Current Frac Spread (Cents/Gal)

Date: March 4, 2010

Conway

Change from

Mont

last week

Belvieu

last week

Ethane

60.20

72.54

Shrink

30.90

32.02

Margin

29.30

10.41%

40.52

2.34%

Propane

120.82

121.62

Shrink

42.69

44.24

Margin

78.13

-2.92%

77.38

-2.12%

Normal Butane

142.45

150.88

Shrink

48.32

50.09

Margin

94.13

6.43%

100.79

3.97%

Iso-Butane

153.70

165.10

Shrink

46.41

48.11

Margin

107.29

-1.84%

116.99

2.36%

Pentane+

180.50

180.16

Shrink

51.68

53.56

Margin

128.82

1.65%

126.60

0.12%

NGL $/Bbl

48.08

-0.24%

50.20

0.16%

Shrink

17.02

17.64

Margin

31.06

1.78%

32.55

0.70%

Gas ($/mmBtu)

4.66

-3.72%

4.83

-0.82%

Gross Bbl Margin (in cents/gal)

71.16

1.53%

76.04

0.56%

NGL Value in $/mmBtu

Ethane

3.31

2.68%

3.99

0.92%

Propane

4.19

-3.20%

4.22

-1.65%

Normal Butane

1.54

2.76%

1.63

2.33%

Iso-Butane

0.96

-2.41%

1.03

1.41%

Pentane+

2.33

0.06%

2.32

-0.16%

Total Barrel Value in $/mmbtu

12.33

-0.27%

13.20

0.10%

Margin

7.67

1.95%

8.37

0.64%

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.