With the average natural gas price at the Waha hub in West Texas again trading below zero, HCS Energy Consulting is studying the annual reports of Permian focused producers to see how much the natural gas pipeline constraints impacted the oil focused Permian basin producers in 2018. Waha gas prices first traded below zero (essentially paying a disposal fee to give your gas away) on February 5th and dipped below zero again on April 3rd. For anybody who had available firm pipeline capacity, on April 3rd they received an average price of $3.75/mmbtu
to take the gas off the producer’s hands, shipped it to Henry Hub, and sold it for $2.72/mmbtu, generating total revenue of $6.47/mmbtu before deducting pipeline shipping costs which are in the $0.30 -$0.40/mmbtu range. In looking back at 2018, the Henry Hub average daily natural gas price was $3.11/mmbtu which is approximately $2.88/mcf based on a 1,080 btu/cubic foot heating factor. By comparison, Diamondback recognized $1.76/mcf and Pioneer recognized $1.90/mcf which were 61% and 66% of the Henry Hub price respectively in 2018. What do you think ?
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