Are NGL Prices Low or High? Can They Be Both at the Same Time?

Over the past few weeks, NGL prices have dropped to levels relative to other hydrocarbon prices that we have not seen since the bad old days of 2009.  Since early April 2013, the frac spread (see Another Fracing Problem and RBN Spotcheck graphs) has averaged less than a bargain basement level of $5.00/MMbtu.  For months ethane at Mont Belvieu has been valued at no better than the price of natural gas at the Henry Hub.  Propane at Mont Belvieu languishes below 40% of the value of crude oil, and normal butane at 50% of crude oil, levels not seen in years. Even natural gasoline (being exported in record volumes to Canada for diluent) is down to only 85% of crude.    Must NGLs do some kind of dirty deeds to recapture their historical valuation?  Or is this the new normal?  Today we kick off a three part blog series to explore the sad case of rock bottom NGL prices.

2012 has not been a good year for natural gas liquids prices.  Spring was a particularly brutal season, with prices falling to levels not seen since the bad ole days of 2009.  This summer prices have recovered from late-June lows, but the numbers are still in the dog house relative to the past couple of years.  Although this is hardly something that sprung up overnight, lately it seems like there has been a rash of hand wringing by analysts, rating agencies and not a few companies warning about the consequences for midstream businesses and NGL producers.  Our friends at Tudor Pickering called it a ‘Blood Bath’.  Is it really that bad?  Our blog series in March called 2012 the ‘Golden Age’ of gas processors. Have we gone from a Golden Age to a Blood Bath in six months?  It seems like it’s time for another deep dive into gas processing and NGL production.

Welcome to 2015!  No, the last few months of 2014 were not a dream – or nightmare, depending on your perspective.  Crude oil prices really did come crashing to earth, sucking down NGL prices in the process.  And natural gas prices followed, falling to $3/MMbtu last week.  Price relationships are out the window, as are drilling budgets.  Over the next few months, these markets will be going through some of the most dynamic changes in years, with unpredictable consequences.  Unpredictable?  Nah.  No mere market turmoil will dissuade RBN from sticking our collective necks out a third year in a row to peer once more into the crystal ball.   Today we wrap up RBNs Top Ten Energy Prognostications for 2015 – Year of the Goat – #5 to #1.