NGLs: What are they?

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Natural gas liquids, or NGLs, are a group of hydrocarbons (ethane, propane, butanes, and pentanes) that are often found alongside dry natural gas (methane). Many upstream companies (companies that produce crude oil and natural gas) garner much of their revenue from producing and selling NGLs—especially those that have a significant amount of “rich gas” assets, or natural gas assets “rich” in liquids. Some of these companies include Range Resources (RRC), Chesapeake Energy (CHK), SM Energy (SM), and Linn Energy (LINE).

NGL prices have been depressed this year because the shale plays, especially the Marcellus Shale, are rich in NGLs.

There is a lot of new industrial demand coming on-line in the next 18 months that should help to improve NGL prices.