Conway frac spread margins were weaker this week than their Mont Belvieu counterparts, as prices for natural gas liquids (NGLs) fell further in Kansas. The biggest drop in margin at both hubs was ethane, which was down 13% at Conway and 11% at Mont Belvieu.

Mont Belvieu propane and Conway iso-butane were tied for the second largest drop in margin for the week at 11%. C5+ was the stronger performer for the week as it was the lone NGL to improve its frac spread margin at both hubs – improving 5% at Conway and 2% at Mont Belvieu.

Texas butane and iso-butane were the only other NGLs to experience improved frac spread margins with a 3% and 2% improvement, respectively.

After several weeks of iso-butane being the most profitable NGL to make at Conway, C5+ moved back ahead after the large margin decrease for iso-butane at the hub combined with an improved C5+ margin. The Conway margin was US$1.18 per gallon (/gal) while the Mont Belvieu margin was $1.19/gal.

This was followed, in order, by iso-butane at $1.05/gal at Conway and $1.10/gal at Mont Belvieu; butane at 82¢/gal at Conway and 91¢/gal at Mont Belvieu; propane at 79¢/gal at Conway and 75¢/gal at Mont Belvieu; and ethane at 29¢/gal at Conway and 38¢/gal at Mont Belvieu.

Natural gas in storage for the week of Feb. 5, 2010, the most recent data available from the U.S. Energy Information Administration, was down 191 billion cubic feet (Bcf) to 2.215 trillion cubic feet (Tcf) from 2.406 Tcf. This was 8% above the storage level of 2.043 Tcf reported last year at the same time and 5% above the five-year average of 2.101 Tcf.

Barclays Capital’s Natural Gas Weekly Kaleidoscope noted that the recent cold spells that have affected much of the continental United States are likely to have worked off the excess storage capacity. Further, it is possible that storage may have dipped to a deficit due to this weather.

The U.S. National Weather Service’s forecast for the coming week suggests that this cold front will not end as the East Coast, especially the southern Mid-Atlantic region. These colder temperatures are expected to extend throughout the Mid-West into the Mountain regions where normal winter weather is expected. – Frank Nieto

Current Frac Spread (Cents/Gal)

Date: Feb. 18, 2010

Conway

Change from

Mont

last week

Belvieu

last week

Ethane

65.18

74.91

Shrink

36.40

36.93

Margin

28.78

-12.98%

37.98

-11.26%

Propane

129.10

126.33

Shrink

50.29

51.02

Margin

78.81

-7.36%

75.31

-10.56%

Normal Butane

138.65

148.93

Shrink

56.93

57.76

Margin

81.72

-1.30%

91.17

2.79%

Iso-Butane

159.30

165.80

Shrink

54.68

55.48

Margin

104.62

-11.28%

110.32

1.64%

Pentane+

178.65

180.40

Shrink

60.88

61.77

Margin

117.77

4.87%

118.63

1.96%

NGL $/Bbl

49.71

-3.89%

51.06

-3.00%

Shrink

20.06

20.35

Margin

29.65

-4.82%

30.71

-4.57%

Gas ($/mmBtu)

5.49

-2.49%

5.57

-0.54%

Gross Bbl Margin (in cents/gal)

68.05

-5.18%

71.83

-5.12%

NGL Value in $/mmBtu

Ethane

3.59

-7.41%

4.12

-6.28%

Propane

4.48

-5.52%

4.39

-6.77%

Normal Butane

1.50

-1.79%

1.61

1.47%

Iso-Butane

0.99

-8.45%

1.03

0.90%

Pentane+

2.30

2.24%

2.33

1.09%

Total Barrel Value in $/mmbtu

12.86

-4.58%

13.48

-3.83%

Margin

7.37

-6.08%

7.91

-6.03%

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.