My understanding is that NG is not hedged. As such, I'm not clear as to why they are realizing only $2.28 per Mcf. This is supposed to include the cost of transport and some 3rd party deducts, so that accounts for something... not sure how much. While $2.28 is 15%+ better than last quarter, I had anticipated a little better. Anyone have some insight on this? TIA
I tried to post this before. The prospectus clearly identifies that the price they receive for oil, ng, and ngl will be effected by differentials (ranging from $1.35 to 1.90 on ng) due to location of the sale, and other items (spelled out on page 60-1 of the prospectus).
I spoke with a fellow at a party last night who, in fact, is an expert witness specifically in the NG industry. He indicated that $1 per mcf was "normal" spread between market price and realized prices, with another $.25 per ncf possible for "fuel" (apparently this is what is used to pay for all of the stuff necessary to prepare the ng for use and transport. He thought these costs were at the high end of normal, but still normal. He also said these companies have all kinds of places they can hide things. Net take on this - we seem to be getting shorted by around $.75 per mcf in the trust. Where's it going?
If the differentials were estimated at $1.35 to $1.90, then they are actually on the low end for this quarter. While it may be comforting to know that they are doing as they said they would (per prospectus), it sure feels more like a scalp than a haircut. I'll have to go back to the volumes to impute what kind of price we'd need to reach at Henry Hub to make the distribution exceed the floor, assuming volumes remain constant.
I sent them two different messages asking for an explanation of the low selling prices for NG and got no reply. I still believe that Chesapeake has their hand in this til as a "3rd party" and is skimming off the top,