Waha daily cash prices (Permian Nat. Gas Pricing Hub) traded down to $-.75 today. How can prices trade negative? The producer is paying the buyer to take the gas off their hands so that they can continue to produce more valuable production (Oil and NGLs). There may be relief in the near future as GXP (Gulf Express Pipeline), a Kinder Morgan project that is slated to come on this year, may be entering service early. With this, all of the gas in the Permian is going to make its way to the gulf coast. Like we talked about in an earlier post, similar to the Appalachian region, while this will improve the differential between Waha and Henry Hub, it will create downward pressure on the Henry Hub pricing, as more supply enters the region. The main uptake for all of the extra supply should be the LNG export facilities, however, much of that demand will only be there if it is economic to liquefy the gas, transport it to Europe or Asia and sell it in those destination markets. These netbacks between the destination market pricing, the expenses of LNG and the Henry Hub are narrowing.
While all of this paints a gloomy picture, weather can still give a lot of support for pricing this year. If we have a cool spring and hot summer, keeping demand above average prices could stay supportive throughout this year and into next winter. Let’s keep our fingers crossed.
On a brighter note, oil has seen continued strength recently as crude inventories were reported lower than anticipated, and Saudi Arabia has indicated that they would like to have $70 oil to manage their budgetary concerns. The big question is, will the rest of ROPEC fall in line?
If you are a mineral owner/oil and gas royalty receiver or independent producer, and you do not want to have to cross your fingers, or you just don’t have the dexterity, ARC has some excellent financial options for you. We can remove your pricing risk to the downside, pay you up front, and you can keep your producing oil and gas assets.
Learn more about mineral rights ownership today!