Energy Prospectus

Trading Economics: Propane increased $0.09 USD/GAL to $0.87/GAL or 11.33% since the beginning of 2025, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity. Historically, Propane reached an all-time high of 1.67 in February of 2014.

See chart here: https://tradingeconomics.com/commodity/propane

For my forecast models, I will be increasing NGL prices by 10% from Q4 2024 to Q1 2025 and ramping them up another 10% by Q4 2025.

This morning, I am updating my forecast model for SM Energy (SM). In 2024 their averaged realized NGL price was $22.72/bbl ($24.01/bbl in Q4). In 2022 when SM's realized natural gas prices was $4.93/mcf, their average realized NGL price was $32.73/bbl.

Winter storms with high winds rolling through the Midwest have depleted propane inventories.

If you have not read Harry's post about the value of SM, I urge you to do so.
My current valuation of SM is $64.50, based on just 3.5 X annualized operating cash flow per share.

This year it is very important that you know the production mix of each upstream company in your portfolio. I show the production mix at the bottom of each forecast model.

Different to Dan, I see no indications that NGL prices in 2025/2026 will increase above Q1 2025 levels. Propane and US NGL prices fluctuate seasonally. NGL prices should fall in the summer of 2025 and 2026 but will return to higher levels during the winter.
There are major differences between in NGL prices between companies due to their location and NGL composition. Canadian NGL prices are higher than US prices. A common NGL price does not exist.

Propane reference price and NGL prices
• NGL is a HC mixture of C3 (propane) to C8 (octane). A standard composition for NGL does not exist. NGL compositions vary per company.
• There are wide variations in NGL compositions and thus in price. C8 is worth more than C3,
• I use Mont Belvieu LDH Propane (C3) price (OPIS) as a reference for predicting future realized NGL prices.
• For each company in my ranking, I calculate the delta between realized NGL price over the last four quarters and the Mont Belvieu price over the same period.
• I use one common future Mont Belvieu C3 price scenario. To this scenario I add the delta for each company, to obtain a forecast of the future NGL prices for each company.
• The future Mont Belvieu price scenario is based on market futures for Mont Belvieu C3, time corrected for the value of money.

2023/2024 propane and NGL prices
• Propane prices fluctuate on a seasonal basis.
• Propane prices are higher in winter (Q1 and Q4) and lower in summer (Q2/Q3) as can be seen in the chart below with actual prices for 2023 and 2024.
• The seasonal propane behavior can also be seen in US NGL prices.
• For the Canadian NGL prices the seasonal behavior is less evident.
• Realized NGL prices for Canadian companies are substantially higher than those for US companies. Canada consumes more NGL than what it produces. Canada is a net NGL importer.
• The Canadian prices in 2023 were $ 10/bbl higher than the US prices. The difference reduced to $ 7.50/bbl in 2024.

Future Propane and NGL prices
• Mont Belvieu prices in January 2025 ($ 38/bbl) and February 2025 ($ 39/bbl) were up 15-18% versus Q4 2024 ($ 33/bbl).
• Based on the Mont Belvieu 2025 and 2026 futures (corrected for the time value of money), I expect a propane price reduction in the summers of 2025 and 2026 to $ 36/bbl, with prices increasing again to $ 38-39/bbl in the winter.
• I see no indications of an increasing trend of propane prices in 2025 and 2026.

Price differences between companies
• There are major differences between the realized NGL prices of individual companies.
• Most companies have realized NGL prices in the range of $ 18-29/bbl
• Some companies (e.g. Civitas, Riley Exploration and Ring Energy) have far lower realized NGL prices (only $10/bbl or even less). This is mostly related to their location in the western Permian with no easy access to NGL markets.
• Other companies such as Antero ($ 44/bbl) and Kimbell Royalty ($ 33/bbl) realized higher prices, mostly due to a richer composition of the NGL. Conclusions
Different to Dan, I see no indications that NGL prices in 2025/2026 will increase above to Q1 2025 levels. Propane and US NGL prices fluctuate seasonally. NGL prices should fall in the summer of 2025 and 2026, but will return to higher levels during the winter.
There are major differences between in NGL prices between companies due to their location and NGL composition. Canadian NGL prices are higher than US prices.

A common NGL price does not exist.

Canadian NGL prices in Q4 2024
Canadian NGL prices are higher than those of their US counterparts. Similar to US, Canadian NGL prices vary over a wide range.

• For Canada NGL prices the variations are mostly due to composition variations (more C7/C8, less C3/C4).
• The bulk of the Canadian oil and gas companies have realized NGL prices in the range of US$ 20-30/bbl.
• The highest NGL prices are realized by Peyto Exploration ($ 47/bbl) and Rubellite ($ 45/bbl).
• Peyto Exploration does not report an oil/condensate stream and the NGL thus will contain substantial heavier elements.
• The NGL from Rubellite are the fluids coming from Perpetual, which also does not report oil and condensates.
• The lowest realized NGL price are by Strathcona Resources. Strathcona reports separate oil and condensate streams. The Strathcona NGL stream will a lean fluid (no heavy components)


Conclusion
Similar to the US, there is not a common Canadian NGL price.