(Note: This is not this week’s frac spread).

The first month of 2010 was a strong showing for natural gas liquids (NGLs) frac spread margins in Mont Belvieu, as margins were up across the board throughout the month. Conway margins were also healthy, with only two smaller drops in margins for propane and butane souring margins at the hub.

Margins were improved due to higher NGL prices at both hubs as well as reduced natural gas feedstock prices due to warmer than normal temperatures throughout much of the month.

The most improved frac spread margin at either hub was Conway iso-butane, which rose 14%. The next most improved margins were Mont Belvieu ethane and C5+, both of which improved by 11%.

The biggest drop in margin for the month was for Conway butane, which was down 2%. By comparison, the smallest improvement in margin for January at Mont Belvieu was for butane, which rose 4%.

The most profitable NGL to make at Conway was iso-butane, which had a margin of US$1.36 per gallon (/gal), followed by C5+ at $1.19/gal. The roles were reversed at Mont Belvieu, where the most profitable NGL to make was C5+ at $1.26/gal followed by iso-butane at $1.22/gal.

These were followed, in order, by butane at $1.05/gal at Conway and $1.03/gal at Mont Belvieu; propane at 85¢/gal at Conway and 86¢/gal at Mont Belvieu; and ethane at 30¢/gal at Conway and 41¢/gal at Mont Belvieu. – Frank Nieto

Current Frac Spread (Cents/Gal)

Date: January 2010

Conway

Change from

Mont

December

Belvieu

December

Ethane

64.90

75.65

Shrink

34.54

34.61

Margin

30.36

3.20%

41.04

10.71%

Propane

132.23

133.63

Shrink

47.72

47.82

Margin

84.51

-0.82%

85.81

7.00%

Normal Butane

158.93

156.70

Shrink

54.03

54.13

Margin

104.90

-2.12%

102.57

4.03%

Iso-Butane

188.00

174.17

Shrink

51.89

51.99

Margin

136.11

13.86%

122.18

6.55%

Pentane+

176.83

184.60

Shrink

57.78

57.89

Margin

119.05

1.76%

126.71

10.81%

NGL $/Bbl

51.74

-4.59%

52.95

-0.29%

Shrink

19.03

19.07

Margin

32.71

1.45%

33.88

8.02%

Gas ($/mmBtu)

5.21

-13.46%

5.22

-12.27%

Gross Bbl Margin (in cents/gal)

75.17

1.61%

79.45

8.04%

NGL Value in $/mmBtu

Ethane

3.57

-6.39%

4.16

-1.14%

Propane

4.59

-5.79%

4.64

-0.79%

Normal Butane

1.72

-6.29%

1.69

-2.25%

Iso-Butane

1.17

4.74%

1.08

0.14%

Pentane+

2.28

-3.77%

2.38

2.37%

Total Barrel Value in $/mmbtu

13.33

-4.84%

13.96

-0.48%

Margin

8.12

1.66%

8.74

8.20%

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.