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Equal Energy Ltd. Message Board

  • nawaralsaadi nawaralsaadi Jun 16, 2012 10:42 PM Flag

    NGLs outlook

    The weakness in NGLs had the biggest impact on Equal this year, bottlenecks at Conway and a warm winter both conspired to sink prices, this is in addition to certain unplanned cracking capacity outages earlier this year. Follows is a good run down of the situation:

    It is looking increasingly likely that by 2013 and beyond the industry should experience better pricing as bottlenecks are resolved, export capacity increased and petrochemicals production increased.


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    • All kinds of deals are offered and closed for +40% over current pricing. The only salvation to a high personal cost basis here might be to add soon to average down. I'm at $4 and kicking myself for hanging on. The forward strips for NG and CL are not that comforting.

    • Figuring out the NGL futures pricing has been the hardest part for me in trying to model EQU's value. I am also a little unclear on what percentages of ethane, propane, butane, and natural gasoline they have in their mix. It makes a big difference in terms of how much their reserves are worth, so I have a pretty broad range of numbers I could see EQU's assets going for. I think in the current environment they will get offers close to their PDP reserves value using current strip prices and they won't get much credit for undeveloped land.

      • 1 Reply to skepticalnewtrader
      • Skeptical, their mix is as follows:

        35% ethane
        35% propane
        15% butane
        15% Isobutane

        Indeed the pricing for NGLs has a significant impact on their valuation; there is quite a sharp contango in NGLs out of Conway in anticipation of the new take away capacity to MB, to be on the safe side I would use something like 38% of WTI as an average to model long term prices, instead of the historic 50%+.

        Based on your current models, and what share price you think they will be taken out?.