Despite NGL prices remaining flat throughout the month, a sharp drop in natural gas prices helped support frac-spread margins in March at both Conway and Mont Belvieu.
The price of natural gas fell 24% to $1.79 per million Btu (/MMBtu) at Conway and 20% to $1.89/MMBtu at Mont Belvieu. These prices were amongst the lowest at both hubs in a decade, due to the perfect storm of an extremely mild winter and high production rates that has led to very large storage levels.
The drop in NGL prices was minimal by comparison to dry gas prices because of the relationship of NGLs to crude prices as well as the continued strength of the North American petrochemical market. Petrochemical demand remains strong as scheduled maintenance has caused shutdowns at several ethane crackers in the U.S.
Once these facilities come back online this spring, prices should experience a slight rebound before several fractionators are taken down for maintenance. However, once these cracker and fractionator turnarounds are completed, Mont Belvieu ethane prices and margins should experience dramatic improvements.
Even with less cracker capacity, the margin for Mont Belvieu ethane improved 7% in April. By comparison, Conway ethane was the only NGL to experience any real decrease in margin as it tumbled 47% as there is a limited market in the play and limited capacity out of the play. However, Kinder Morgan began to offer transportation capacity for E-P mix (which is how ethane is traded at Conway) out of Conway to Nova Chemicals’ ethylene plant in Sarnia, Canada, as April began.
Conway propane margins increased very slightly in March, but enjoyed a 7% improvement at Mont Belvieu for the month. These increases should grow in the next few months as exports are expected to increase, which will help to work off the excess supplies that have built up this winter due to the unseasonably warm weather.
Contact the author, Frank Nieto, at fnieto@hartenergy.com.
Recommended Reading
As ONEOK Digests Magellan, Sets Stage for More NGL Growth in 2024
2024-02-28 - ONEOK is continuing the integration of its newly acquired Magellan assets in 2024 as the company keeps an eye out for M&A opportunities and awaits regulatory approvals for certain projects.
Dallas Fed Energy Survey: Permian Basin Breakeven Costs Moving Up
2024-03-28 - Breakeven costs in America’s hottest oil play continue to rise, but crude producers are still making money, according to the first-quarter Dallas Fed Energy Survey. The situation is more dire for natural gas producers.
Enterprise Buys Assets from Occidental’s Western Midstream
2024-02-22 - Enterprise bought Western’s 20% interest in Whitethorn and Western’s 25% interest in two NGL fractionators located in Mont Belvieu, Texas.
EIA: E&P Dealmaking Activity Soars to $234 Billion in ‘23
2024-03-19 - Oil and gas E&Ps spent a collective $234 billion on corporate M&A and asset acquisitions in 2023, the most in more than a decade, the U.S. Energy Information Administration reported.
Sitio Royalties Dives Deeper in D-J with $150MM Acquisition
2024-02-29 - Sitio Royalties is deepening its roots in the D-J Basin with a $150 million acquisition—citing regulatory certainty over future development activity in Colorado.