Natural gas liquid (NGL) frac spreads followed their NGL price movements this past week, as every NGL frac spread margin was up this week aside from C5+, the lone NGL to fall in price this week.

Ethane margins showed the biggest improvement this week as the Conway margin rose 13% and the Mont Belvieu margin was up 14% from last week.

Overall, Conway margins showed more improvement than their Mont Belvieu counterparts with three NGL frac spread margins improving by over 12%. In addition, to the aforementioned ethane margin, Conway propane margins were up 13% and its iso-butane margin rose 12%.

Despite a 3% drop in margin at Conway and a 2% margin decrease at Mont Belvieu, the most profitable NGL to make at both hubs was C5+. The margin was $1.22 per gallon (/gal) at both hubs. This was followed, in order, by: iso-butane at $1.19/gal at Conway and $1.20/gal at Mont Belvieu; butane at $1.02/gal at Conway and $1.04/gal at Mont Belvieu; propane at 79¢/gal at Conway and 76¢/gal at Mont Belvieu; and ethane at 29¢/gal at Conway and 39¢/gal at Mont Belvieu.

The natural gas storage report continued to represent good news for producers. Natural gas in storage for the week of January 15, the most recent data available from the U.S. Energy Information Administration, fell 245 billion cubic feet to 2.607 trillion cubic feet (Tcf). This was 1% greater than the storage level of 2.585 Tcf reported last year at the same time and down slightly from the five-year average of 2.613 Tcf.

The U.S. National Weather Service’s forecast for the coming week includes colder than normal weather in the western parts of the Mid-West into the Rockies and parts of the Southwest. Warmer temperatures are expected in parts of the Southeast and Pacific Northwest. Normal winter weather temperatures are expected in the rest of the country. – Frank Nieto

Current Frac Spread (Cents/Gal)

Date: Jan. 28, 2010

Conway

Change from

Mont

last week

Belvieu

last week

Ethane

65.65

76.30

Shrink

36.73

37.79

Margin

28.92

13.00%

38.51

13.95%

Propane

129.32

127.98

Shrink

50.75

52.21

Margin

78.57

12.72%

75.77

5.78%

Normal Butane

158.93

162.75

Shrink

57.45

59.11

Margin

101.48

8.41%

103.64

9.30%

Iso-Butane

174.58

176.60

Shrink

55.18

56.77

Margin

119.40

12.13%

119.83

5.23%

Pentane+

183.30

184.80

Shrink

61.44

63.21

Margin

121.86

-3.15%

121.59

-2.13%

NGL $/Bbl

51.60

5.90%

52.78

4.98%

Shrink

20.24

20.82

Margin

31.36

7.20%

31.95

5.49%

Gas ($/mmBtu)

5.54

3.94%

5.70

4.20%

Gross Bbl Margin (in cents/gal)

71.74

7.74%

74.57

5.69%

NGL Value in $/mmBtu

Ethane

3.61

7.75%

4.20

8.91%

Propane

4.49

9.10%

4.44

5.13%

Normal Butane

1.72

6.75%

1.76

7.39%

Iso-Butane

1.09

9.41%

1.10

4.90%

Pentane+

2.36

-0.88%

2.38

-0.05%

Total Barrel Value in $/mmbtu

13.27

6.55%

13.88

5.56%

Margin

7.73

8.50%

8.18

6.53%

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.