Conway ethane prices experienced a severe price drop that pushed the frac spread margin to where it is realistically unprofitable to make at the hub by mid-February. The frac spread dropped 59% from Jan. 24 to Feb. 7. However, there is no widespread ethane rejection in the Midcontinent as prices in the hub are based on an ethane-propane mix, which could still result in some form of profitability.

Although ethane also had the largest decrease in margin at Mont Belvieu, at 25%, it remains profitable because of the amount of cracking capacity at the hub. In addition, while Mont Belvieu decreases were also because of limited fractionation capacity, this is a temporary headwind at the hub caused by facility turnarounds. The Conway situation is a long-term one as there is no real local market for natural gas liquids (NGL) and capacity out of the play remains constrained.

Meanwhile, mild winter temperatures resulted in a somewhat depressed market for propane, which was compounded by lower export demand for the product from late 2011 to early 2012. However, propane export demand began to increase in February, specifically from Europe and Asia. Whether these increases are long-term remains to be seen.

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