Over the past nine months, the frac spread —a rough-cut measure of the value of extracting NGLs from raw gas at gas processing plants — has taken a terrifying plunge, from $9.82/MMBtu in early March to only $2.16/MMBtu on Monday. Given that the frac spread is the differential between the price of natural gas and the weighted average price of a typical barrel of NGLs on a dollars-per-MMBtu basis, a 78% nosedive like that suggests that something is seriously out of whack, and that at least some market players are taking a real hit financially. In today’s RBN blog, we discuss the frac spread, the drivers behind its recent freefall, and what it would take for gas processing margins to rebound.
Crash and Burn – Why Did the Frac Spread Collapse? And What’s Next?
