Oil V Natural Gas pricing oil vs gasFrom Bull at ADVFN
I have seen a few posts stating that oil equivalent in gas isn't worth as much as as oil so I thought I would break it down
One barrel of oil equivalent is equal to about 5800 cubic feet of gas or 5.8MCF. We know TXP will be receiving around $2.50 per MCF from NGC so essentially they are receiving $14.50 per barrel of oil equivalent ( $2.50x5.8). We also know operating costs are around $0.05 per MCF or $0.29 per barrel of oil equivalent. We also know royalties are 12.5%. Therefore the can calculate the netback per barrel of oil equivalent of gas as $12.41
Oil is a bit more difficult to calculate due to the volatile nature of oil prices. From year end 2020 results we can see netback was $14.49 per barrel with an average oil price of $38 and $26.61 per barrel with an average oil price of $58. There are also additional taxes to consider with oil.
So with lower oil prices, gas is worth the equivalent of a barrel of oil.