Plant products, NGLs, and residue gas: reading a wet-gas royalty check stub
In liquid-rich gas plays like the Eagle Ford and parts of the Cotton Valley, your check stub splits a single well's stream into condensate (barrels), plant products / NGLs (gallons or barrels), and residue gas (Mcf or MMBtu). Here is what each line means and how plant processing contracts affect your payout.
This is general information from independent landmen, not legal advice.
Dry gas (such as deep Haynesville Shale gas) is almost pure methane and goes straight from treating into a sales pipeline. Rich or wet gas (common across the Eagle Ford, Cotton Valley, and Permian) comes out of the ground carrying heavier hydrocarbons mixed into the gas stream. At the wellhead separator, free liquid drops out as condensate (sold by the barrel like crude oil). The remaining high-BTU gas travels to a cryogenic processing plant, which chills the gas to strip out Natural Gas Liquids (NGLs / plant products), ethane, propane, normal butane, isobutane, and natural gasoline, and sells the remaining dry methane at the plant tailgate as residue gas. Because NGLs and residue gas are sold under separate contracts and units of measure, they appear as separate product lines on your royalty stub.
1The three product lines from one wet-gas well
| Product Line on Stub | Unit of Measure | Where it separates | Pricing benchmark |
|---|---|---|---|
| Condensate / Oil (COND / OIL) | Barrels (BBL, 42 US gallons) | Lease separator and stock tanks on the well pad. | Crude/condensate postings (e.g., WTI or Corpus Christi / Houston condensate index). |
| Plant Products / NGLs (PROD / NGL /PPR) | Gallons (GAL) or Barrels (BBL) | Cryogenic gas processing plant downstream of the gathering system. | Mont Belvieu NGL purity component prices, less fractionation and transport differentials. |
| Residue Gas (GAS / RES) | Mcf or MMBtu | Tailgate of the gas processing plant after NGLs are extracted. | Natural gas hub index (e.g., Houston Ship Channel, Agua Dulce, Katy, or Henry Hub). |
2Plant shrinkage and why residue Mcf is lower than RRC wellhead Mcf
When you look up a wet-gas well on the Railroad Commission of Texas Production Data Query, the monthly gas volume reported on Form PR is measured at or near the lease meter before the gas enters the processing plant (`Disposition Code 3, Processing Plant`).
Inside the processing plant, two things reduce the volume of gas before residue gas is sold at the plant tailgate:
- Plant thermal/volume shrinkage: Converting wet hydrocarbon vapor into liquid gallons of ethane, propane, and butane physically removes those molecules from the gas stream.
- Plant & compressor fuel: A portion of the gas is burned to run field compressors and plant refrigeration turbines.
Because of shrinkage and plant fuel, the Residue Gas Mcf line on your check stub will always be smaller than the raw wellhead Mcf reported to the Railroad Commission, while the missing hydrocarbons show up on the separate Plant Products / NGL line.
3POP (Percentage of Proceeds) vs. fee-based processing
Producers contract with midstream processing plants in two main ways, and both show up differently on royalty stubs:
- Fee-based processing: The producer retains 100% of the residue gas and 100% of the recovered NGLs, and pays the plant a cash processing and fractionation fee per Mcf or per gallon (which appears as a
PROCorFRACdeduction on stubs where the lease allows post-production deductions). - Percentage of Proceeds (POP): The processing plant keeps a percentage (for example, 15% or 20%) of the residue gas and/or NGL proceeds as its compensation, and remits the remaining 80% or 85% to the producer. If a lease requires royalties to be paid on 100% of the volume and value produced without midstream volume retention, a POP reduction in reported stub volume or price is a critical audit point.
4What to check in your lease's plant-products clause
Older printed lease forms sometimes contain a separate royalty provision for casinghead gas or gas processed in an affiliate's plant that pays royalty on only a fraction of plant products (or values casinghead gas at the wellhead), whereas modern landowner-oriented lease addenda specify that royalty applies to 100% of all residue gas and 100% of all extracted liquids and plant products without deduction for processing, fractionation, or marketing.
Ask for a wet-gas stub review
Tell us where the well is and send a stub when we reply. We reconcile the wellhead Mcf reported to the state against the residue gas and NGL lines on your check stub and read your lease's processing language.
We work as independent landmen. We aren't attorneys and don't give legal opinions; we work alongside your attorney and title company. Nothing here is a substitute for the advice of an attorney.
Rather talk it through?(307) 263-8515 · hello@naturalgas.land