Isobutane Has Most Profitable Frac Spread At Conway

Once again frac spreads followed NGL price trends both up and down at both Mont Belvieu and Conway as natural gas feedstock prices improved, but not enough to have a large pull on margins.

For the week of Sept. 7, natural gas prices rose 2% at Conway to $3.89 per million Btu (/MMBtu) and the Mont Belvieu price increased 1% to $3.91/MMBtu. This is at the same level at which gas has traded at both hubs for the past month, reflecting a stagnant and oversupplied dry gas market.

By contrast, liquids have been mainly improving during this time at both hubs and helping to improve margins following the market downturn caused by Standard & Poor’s decision to lower the U.S. credit rating. This improvement has been most felt in ethane margins for the past few weeks, especially at Conway where margins are strongly positive. The Conway margin improved 31% from last week. Though the Mont Belvieu margin improved only 3% by comparison, the frac spread value is more than double the Conway spread.

Butane margins also benefitted from higher NGL prices this week as the Conway margin rose 6% and the Mont Belvieu margin increased 2% from the previous week. Isobutane had the largest increase in margin at Mont Belvieu, as it improved 4%.While Conway had the largest increases in margin at either hub this week, it also had the only margin declines with both propane and C₅₊ margins, down 2% from last week.

The theoretical NGL barrel price increased 2% at both hubs this week with the Conway price up to $52.63 per barrel (/bbl) with a 2% improvement in margin to $38.42/bbl. The Mont Belvieu price was $62.27/bbl with a 2% increase in margin to $47.99/bbl.

The most profitable NGL to make at Mont Belvieu remained C₅₊ at $1.98 per gallon (/gal). However, for the second time in a month, isobutane assumed the most profitable status at Conway at $1.70/gal. The roles were reversed at both hubs for the second most profitable NGL to manufacture with Mont Belvieu isobutane at $1.74/gal and Conway C₅₊ at $1.65/gal. Following these, in order at both hubs, were butane at $1.32/gal at Conway and $1.55/gal at Mont Belvieu; propane at $1.07/gal at Conway and $1.23/gal at Mont Belvieu; and ethane at 16¢/gal at Conway and 46¢/gal at Mont Belvieu.

Natural gas in storage for the week of Sept. 9, the most recent data available from the Energy Information Administration, increased 87 billion cubic feet to 3.112 trillion cubic feet (Tcf) from 3.025 Tcf the previous week. This was 4% below the level of 3.252 Tcf reported last year at the same time and 2% below the five-year average of 3.164 Tcf.

The National Weather Service’s forecast for the coming week includes warmer than normal weather for much of the West Coast and Midwest and portions of the Northeast, which should increase cooling demand and may hinder next week’s storage injection. Cooler than normal weather for mid-September is expected throughout the Southeast and parts of the Gulf Coast.