Source: The Barrel Blog | Taylor Cavey, Energy Analyst | September 20, 2017
Despite devastating weather that sent energy market participants into a frenzy, the average of the 12-month forward curve for WTI remained flat month on month at $50.43/b. However, internal rates of return (IRR) increased across the board due in large part to higher natural gas liquids (NGLs) prices.
More than three weeks ago, Hurricane Harvey hit the US Gulf Coast with an estimated 51 inches of rain near Mt. Belvieu, Texas, a prominent US NGL price hub. As a result, the entire midstream sector was forced to respond, sending liquids prices higher. While we typically think of the Permian and Eagle Ford basins as oil plays, there are a fair amount of NGLs produced as well. A typical well in both the Permian and Eagle Ford has an NGL composition of around 25%, and with higher liquids prices, returns in each play have benefited. IRRs in the Permian Delaware and Eagle Ford increased 1.3 percentage points to 32% and 25%, respectively.
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