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NGI Publishes Natural Gas Shale Price Index (SPI) Methodology

Natural Gas Bidweek Prices Tackled For a Loss; NGI Proposes Utility Breakout of Chicago Quote

NGI Publishes Natural Gas Shale Price Index (SPI) Methodology
SPI Sample Data Available at info.naturalgasintel.com/spi

Natural Gas Intelligence, a leading natural gas market publication, announced today it has published a detailed methodology for NGI’s daily natural gas price surveys of 16 North American shale and unconventional gas plays which appear every business day in NGI’s Shale Daily.

The Shale methodology describes the parameters used in calculating the daily Shale Price Index (SPI) of prices at 20 points in the 16 most prolific unconventional basins. The shale/unconventional basins are: the Barnett, Marcellus, Utica, Eagle Ford, Haynesville, Permian, Tuscaloosa Marine Shale, Arkoma-Woodford, Cana-Woodford, Fayetteville, Granite Wash, Green River Basin, Niobrara-DJ, Piceance, Uinta, and San Juan. There are four separate points for the largest Basin, the Marcellus, and two in the Haynesville (Download the last three months of SPIs from this page: info.naturalgasintel.com/spi.).

In calculating the shale basin prices NGI has drawn on the price information base gathered for its overall daily North American natural gas price survey of more than 100 points, published by Intelligence Press Inc. since 1993 in NGI’s Daily Gas Price Index.

The data published in the Shale Price Index (SPI) are provided voluntarily by market participants in accordance with guidance from the Federal Energy Regulatory Commission (FERC). The price surveys include day-ahead, delivered-to-pipeline spot market prices that aim to represent the price of production for each of the U.S. unconventional plays listed in the SPI table. Although they are called “Shale” Price Indices, they in fact include the prices of all gas produced or sold within or adjacent to the counties and parishes that comprise each unconventional play.

We detail the counties/parishes that make up each SPI formation in the Point-by-Point description section of the 51-page methodology accessible on the NGI website at http://www.naturalgasintel.com/ext/resources/Shale-Daily/Shale-Methodology.pdf. There also is available a methodology detailing the points reported in Daily GPI.

The pipelines and market hubs we include in calculating each individual SPI price are largely the result of an extensive analysis we conducted of nominations data reported by the various natural gas pipelines that serve the U.S., by speaking with physical market traders and pipeline representatives, and by the knowledge we have garnered over the years from determining day ahead natural gas spot market prices. Our information sources for determining the methodology also include state oil & gas commission data, individual company reports, SEC filings, and U.S. government data.

While we value continuity and attempt to maintain the parameters in the methodology, we will change them as necessary as the various unconventional plays we cover continue to evolve, in order to ensure our SPI prices remain representative. For example, since we debuted the SPI table in October 2010, we have reassigned Dominion North Point and Tennessee 313 Pool trades from our “Marcellus NE PA – Other” to our “Utica” Shale index, since the counties in Northwest Pennsylvania now seem to be more commercial for the Utica than the Marcellus.

Recently, Tennessee Gas Pipeline effectively endorsed NGI’s daily indexes by adopting, with FERC approval, 12 pricing points from Natural Gas Intelligence’s (NGI) Daily Gas Price Index for calculating cash-outs on its system, replacing broader indexes from other sources. Tennessee said the changes were requested by certain shippers and noted that “Natural Gas Intelligence publishes multiple region-specific indices, which reflect the market-determined pricing points prevailing on Tennessee’s system.”

Also, as required by the Federal Energy Regulatory Commission’s Policy Statement of Natural Gas and Electric Price Indices, an independent auditing firm recently completed an agreed upon procedures (AUP) study of NGI’s price setting procedures and its methodology, verifying the accuracy of computations, recordkeeping, provenance and data collection. For more information on the review, please visit our website at www.naturalgasintel.com, and select *New* NGI Price Index Audit Report Results from the Data dropdown menu at the top of the page.

Natural Gas Bidweek Prices Tackled For a Loss; NGI Proposes Utility Breakout of Chicago Quote

Natural gas bidweek prices must have taken a page or two from the petroleum playbook as February quotes slid across the country. Only a handful of points managed gains, and losses of 25 cents to 50 cents were common, according to Natural Gas Intelligence (NGI).

The lack of sustained cold combined with robust natural gas supplies resulted in weak prices for monthly supplies. The NGI February National Bidweek Average slipped 32 cents to $3.23 (download a copy of the February NGI Bidweek Survey here). Taken as a whole, the Northeast region suffered the least, dropping only a penny month-to-month to average $4.32. It was the best of times and the worst of times in that region, however, as losses at Tennessee Zone 6 200L (down 77 cents to average $10.29) were offset by gains of $1.16 at Transco Zone 6 New York and 78 cents at Tetco M-3 to average $9.60 and $5.13, respectively.

The West Coast and mid-section of the country took the biggest hits with California dropping 43 cents to $2.87 and the Midwest, Midcontinent, and Rocky Mountains sliding 49 cents, 47 cents, and 46 cents to $3.04, $2.75, and $2.66, respectively. NGI’s Chicago Citygate, which combines deals into the four major Chicagoland LDCs, fell a whopping 59 cents to average $3.02 for the month.

NGI put out Monday a call for comments for a proposal to post -- in addition to its existing Chicago Citygate index -- breakout price information for gas delivered to each of those utility distributions systems. NGI’s Chicago Citygate is a weighted average of transactions delivered into Nicor Gas, NIPSCO, North Shore, and Peoples, so providing separate detail for these four LDCs will in no way impact how NGI calculates the existing Chicago Citygate index. It is simply a way to provide additional detail behind NGI’s Chicago index. For more information on the call for comment, please visit natgasintel.com/pricenotice.

The South Texas bidweek average came in 35 cents lower at $2.76, and South Louisiana was off 32 cents to $2.83. East Texas fell 29 cents to $2.78.

February futures settled at $2.866, down sharply from January's settlement at $3.189.

The tone of bidweek was largely reflected in last Thursday's Energy Information Administration (EIA) Storage report as the bearish figure raised as many questions as it answered, and the actual figure came in well under expectations. The EIA announced a withdrawal from storage of just 94 Bcf, about 20 Bcf less than market expectations, and prices fell hard. At the close, the newly minted spot March futures contract took a 12.3-cent drubbing Thursday to finish at $2.719, and lost another 2.8 cents on Friday to $2.691.

With nine weeks remaining on the traditional withdrawal season, slightly less than 100 Bcf would have to be pulled weekly to bring supplies under the arguably bearish ending inventory level of 1,700 Bcf.

All indications were that the figures for the week ended Jan. 23 would cause an increased surplus relative to a year ago and diminish the year-on-five-year deficit. However, the best minds in the business missed the mark as the number came in far less than what traders were anticipating.

"We were trading unchanged just before the number came out, and this thing fell out of bed once the number was released," said a New York floor trader.

About NGI

Natural Gas Intelligence (NGI), operating under the corporate entity of Intelligence Press, Inc., is the publisher of the NGI family of newsletters--a leading provider of news and physical market pricing information for the deregulated North American natural gas industry. Since the first issue of the Natural Gas Intelligence newsletter published in 1981, NGI has provided information and data relied upon daily by thousands of industry participants in the U.S, Canada and Mexico as well as Central and South America, Europe and Asia.

NGI’s Bidweek Price data, published since 1988, is used each month by thousands of industry participants in supply contracts and pipeline tariffs approved by FERC. NGI has also been publishing Daily price index data since 1993. Recently, Tennessee Gas Pipeline effectively endorsed NGI’s daily indexes by adopting, with FERC approval, 12 pricing points from Natural Gas Intelligence’s (NGI) Daily Gas Price Index for calculating cash-outs on its system, replacing broader indexes from other sources. Tennessee said the changes were requested by certain shippers and noted that “Natural Gas Intelligence publishes multiple region-specific indices, which reflect the market-determined pricing points prevailing on Tennessee’s system.”

Download a free copy of the February NGI Bidweek Survey here:

naturalgasintel.com/bidweek-feb2015.

For free trial access to NGI’s Daily Gas Price Index, visit naturalgasintel.com/trial.

For more information about NGI products or services, visit our website at naturalgasintel.com or contact James Geanakos at 703.318.8848 james.geanakos@natgasintel.com