What Your Well Actually Produces: Oil, Gas, NGL, and More

When you look at a royalty check stub, you may see separate line items for oil, gas, NGL, and condensate. Each one is a different product with its own price and its own market. Understanding what they are helps you make sense of your payments.

Crude Oil

Crude oil is the liquid petroleum that comes out of the ground. It's measured in barrels (one barrel equals 42 gallons) and priced against benchmarks like West Texas Intermediate (WTI). WTI has an API gravity of about 39.6° and a sulfur content of just 0.24%, making it a light, sweet crude. Crude oil is the most valuable product from most wells and typically generates the largest royalty payments.

Not all crude oil is the same. It varies by density (measured as API gravity) and sulfur content. The EIA classifies crude with less than 1% sulfur as "sweet" and more than 1% as "sour." Light sweet crude (API gravity above 31.1°) commands a premium because it's easier and cheaper to refine. Heavy sour crude sells at a discount.

Natural Gas

Natural gas is primarily methane. It comes out of the well either as "associated gas" (produced alongside oil) or as the primary product from a gas well. It's measured in MCF (thousand cubic feet) or MMBTU (million British thermal units) and priced against benchmarks like Henry Hub.

Gas prices are more volatile than oil prices and vary significantly by region. Gas in the Marcellus (Appalachia) may trade at a very different price than gas in Oklahoma or Texas due to pipeline constraints and local supply. These regional price differentials can significantly affect your royalty amounts.

On your check stub, gas is a separate line item from oil with its own volume, price, and revenue calculation.

Natural Gas Liquids (NGL)

NGLs are hydrocarbons that exist as gas in the reservoir but can be separated into liquid form at the surface. According to the EIA, the main NGL components are:

• Ethane: the largest share of NGL production, used almost exclusively as petrochemical feedstock to produce ethylene (for plastics)
• Propane: used for heating and as petrochemical feedstock
• Butane: used in gasoline blending and as lighter fuel
• Natural gasoline (pentanes plus): blended into crude oil or used as diluent

NGLs are extracted at a gas processing plant, which is one of the reasons you see "processing" as a deduction on your check stub. The operator sends the raw gas stream to a plant, where the liquids are separated from the methane. You receive revenue from the NGL stream and the residue gas stream separately.

NGL prices are linked to both oil and gas markets. Ethane prices tend to track natural gas prices, while propane and butane prices are more closely linked to crude oil. They're measured in barrels or gallons.

Condensate

Condensate is a very light liquid hydrocarbon that exists as gas in the reservoir but condenses into liquid when it reaches the lower pressures at the surface. It's similar to natural gasoline and is sometimes called "lease condensate" because it condenses at the lease site rather than at a processing plant.

Condensate is typically priced near crude oil but may receive a premium or discount depending on quality and local market conditions.

Why It Matters

Understanding your product mix helps you:

• Interpret your check stub. Each product has its own volume, price, and revenue line. Knowing what they are helps you read the stub accurately.
• Understand price movements. If your well produces mostly gas, watch gas prices. If it's mostly oil, watch oil prices. A well with heavy NGL production is affected by both.
• Evaluate deductions. Processing deductions apply to the gas stream (separating NGLs from methane). If your well produces dry gas with few liquids, processing deductions should be low. If it produces wet gas rich in NGLs, processing costs are higher but so is the revenue.
• Spot changes. If the product mix on your check stub changes significantly from one month to the next, it could indicate a well problem, an allocation change, or a change in how the operator reports production. Track these in MinRight alongside your decline curve data.