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Magnum Hunter Resources Corp. Message Board

  • lexpress56 lexpress56 Oct 21, 2013 4:08 PM Flag

    Transportation math help needed

    could those of you on the board familiar with gas transportation rates explain what I am missing?

    During the July 9 conference, GE was asked a question re what rates EH was receiving for transporting on the EH pipeline and he said between 28 and 54 cents. I just looked at some transportation tariffs and saw one of CrossTex's deals priced around $,30 per mmbtu. What I don't understand is how the EH pipeline could possibly have $125m of annual ebitda. Please help correct my math or tell me what is missing because if the compressed capacity of the EH system is 350,000 a day, I assume you could count on utilizing about 330,0000 a day x 365 days x sample price of .35, which should generate $42,157,500 in revenue. So how does GE get math that takes the number to $125 million in revenue? I am missing something, but I don't know what. please help as this is one part of the business I don't have a very good handle on. thanks in advance for your help. Lex

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    • Nice question! Here is how we might get the math to work:

      Utica Shale, Southern Noble/Northern Washington Counties: Pipeline North to the Markwest Plant in Northern Noble County (planning stage at this point). If my assumption is correct, the wells on the eastern part of the acreage will be very gassy and could easily fill the pipeline with assistance from other operators.

      Utica Shale/Marcellus Shale Eastern Ohio: Pipeline to Markwest plant in WVA. Can easily fill the pipeline if they can duplicate the Eclipse Performance. Remember, they have two pipe lines, one for liquids, one for dry gas and a water pipeline, which might change the capacity numbers.

      Marcellus Shale, Ritchie County. Recent well results are very strong, Pipeline partly built. I expect them to try to sign Antero and or EQT to contracts. They would have some bottlenecks ore the need to build additional capacity where the Ohio gas meets or they could build a spur to the current Antero provider. I do not expect this to be as big, but add the three together and you get close to your number.

      • 1 Reply to masayo22311
      • So, using your numbers
        Ohio Division: (Washington/Noble County)
        330,0000 a day x 365 days x sample price of .35, which should generate $42,157,500 in revenue
        WVA Division:
        330,0000 a day x 365 days x sample price of .35, which should generate $42,157,500 in revenue
        (From Monroe and Tyler Counties)
        165,0000 a day x 365 days x sample price of .35, which should generate $21,078,750 in revenue (From Richie and Pleasants counties) (needs extra pipeline capacity or a route to another processing facility)
        This gets you to $105 million.

        It appears that Eclipse has made an agreeement with Antero allowing Antero to be the operator in Noble County so they intend to drill in Monroe County. I believe that high quality dry gas does not need to go to one of the main processing centers, so transport of this dry gas may be the rest of the puzzle.