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Share Name | Share Symbol | Market | Type |
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ECA Marcellus Trust I | NYSE:ECT | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.4002 | 0 | 01:00:00 |
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(Mark One)
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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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for the fiscal year ended December 31, 2020
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
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for the transition period from to
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Delaware
(State or other jurisdiction of incorporation or organization) |
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27-6522024
(I.R.S. Employer Identification No.) |
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The Bank of New York Mellon
Trust Company, N.A., Trustee Global Corporate Trust 601 Travis Street, 16th Floor Houston, Texas (Address of principal executive offices) |
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77002
(Zip Code) |
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| | | | | 2 | | | |
| | | | | 2 | | | |
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PART I
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| | | | | 6 | | | |
| | | | | 22 | | | |
| | | | | 42 | | | |
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| | | | | 48 | | | |
| | | | | 48 | | | |
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PART II
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| | | | | 49 | | | |
| | | | | 49 | | | |
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| | | | | 55 | | | |
| | | | | 56 | | | |
| | | | | 65 | | | |
| | | | | 65 | | | |
| | | | | 66 | | | |
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PART III
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| | | | | 67 | | | |
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| | | | | 67 | | | |
| | | | | 67 | | | |
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PART IV
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| | | | | 69 | | | |
| | | | | 70 | | | |
| | | | | 71 | | | |
| | | | | A-1 | | |
Proved reserves
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Proved Gas
Reserves (MMcf) |
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Estimated
Future Net Cash Flows |
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Discounted
Estimated Future Net Cash Flows(1) |
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(Dollars in thousands)
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Royalty Interests: | | | | | | | | | | | | | | | | | | | |
Proved Developed
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| | | | 24,984 | | | | | $ | 15,707 | | | | | $ | 8,731 | | |
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High
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Low
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Calendar Quarter 2020 | | | | | | | | | | | | | |
First Quarter
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| | | $ | 0.78 | | | | | $ | 0.27 | | |
Second Quarter
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| | | $ | 0.66 | | | | | $ | 0.32 | | |
Third Quarter
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| | | $ | 0.49 | | | | | $ | 0.23 | | |
Fourth Quarter
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| | | $ | 0.38 | | | | | $ | 0.14 | | |
Calendar Quarter 2019 | | | | | | | | | | | | | |
First Quarter
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| | | $ | 2.04 | | | | | $ | 1.46 | | |
Second Quarter
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| | | $ | 1.93 | | | | | $ | 1.72 | | |
Third Quarter
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| | | $ | 1.76 | | | | | $ | 1.12 | | |
Fourth Quarter
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| | | $ | 1.19 | | | | | $ | 0.53 | | |
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Description of the Matter
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| | At December 31, 2020, the Trust’s net royalty interest in gas properties was $15.6 million. As discussed in Note 3 to the financial statements, the net royalty interests in gas properties is assessed to determine whether the net capitalized cost is impaired, whenever events or changes in circumstances indicate that its carrying amount may not be recoverable, pursuant to Accounting Standards Codification 360, Property, Plant and Equipment (“ASC 360”). The Trust determines whether an | |
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impairment charge is necessary to its investment in the net royalty interest in gas properties if total capitalized costs, less accumulated amortization, exceed undiscounted future net revenues attributable to proved gas reserves of the Underlying Properties. Estimates of undiscounted future net revenues attributable to proved gas reserves utilize NYMEX forward pricing curves.
Auditing management’s net royalty interest in gas properties impairment assessment involved a high degree of subjectivity as estimates underlying the future cash flows attributable to the underlying properties were based on assumptions that utilize proved gas reserves and NYMEX forward pricing curves. The Trust’s model for estimating undiscounted cash flows for these assets involves assumptions, including projected pricing and projections of net revenues and costs which are impacted by future market and economic trends, such as changes in the future commodity prices and the outlook for regional supply and demand conditions.
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How We Addressed the Matter in Our Audit
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| | To test the estimated undiscounted cash flows for the Trust’s net royalty interest in gas properties, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Trust in its analysis. We compared the significant assumptions used by management to current industry and economic trends as well as external forward strip pricing sources. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the net royalty interest in gas properties that would result from changes in the assumptions. | |
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2020
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2019
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ASSETS: | | | | | | | | | | | | | |
Cash
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| | | $ | 1,103,257 | | | | | $ | 770,833 | | |
Royalty income receivable
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| | | | 583,890 | | | | | | 738,201 | | |
Royalty interest in gas properties
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| | | | 352,100,000 | | | | | | 352,100,000 | | |
Accumulated amortization
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| | | | (336,503,336) | | | | | | (335,055,782) | | |
Net royalty interest in gas properties
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| | | | 15,596,664 | | | | | | 17,044,218 | | |
Total Assets
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| | | $ | 17,283,810 | | | | | $ | 18,553,252 | | |
LIABILITIES AND TRUST CORPUS: | | | | | | | | | | | | | |
Liabilities:
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Distributions payable to unitholders
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| | | $ | 149,871 | | | | | $ | 335,172 | | |
Trust corpus; 17,605,000 common units authorized, issued and outstanding
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| | | | 17,133,939 | | | | | | 18,218,080 | | |
Total Liabilities and Trust Corpus
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| | | $ | 17,283,810 | | | | | $ | 18,553,252 | | |
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Year Ended
December 31, 2020 |
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Year Ended
December 31, 2019 |
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Royalty income
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| | | $ | 1,703,048 | | | | | $ | 4,145,585 | | |
Net proceeds to Trust
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| | | $ | 1,703,048 | | | | | $ | 4,145,585 | | |
General and administrative expense
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| | | | (1,195,783) | | | | | | (1,266,508) | | |
Interest income
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| | | | 4,541 | | | | | | 19,992 | | |
Cash proceeds from sale of net profit interests
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| | | | 799 | | | | | | — | | |
Income available for distribution prior to cash reserves
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| | | | 512,605 | | | | | | 2,899,069 | | |
Cash reserves withheld by Trustee
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| | | | (360,000) | | | | | | (395,916) | | |
Interest withheld on cash reserves
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| | | | (2,733) | | | | | | (2,485) | | |
Distributable income available to unitholders
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| | | $ | 149,872 | | | | | $ | 2,500,668 | | |
Distributable income per common unit (17,605,000 units authorized and outstanding for 2020 and 2019)
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| | | $ | 0.009 | | | | | $ | 0.141 | | |
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Year Ended
December 31, 2020 |
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Year Ended
December 31, 2019 |
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Trust Corpus, Beginning of Period
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| | | $ | 18,218,080 | | | | | $ | 46,933,314 | | |
Cash reserves withheld, including interest
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| | | | 362,733 | | | | | | 398,401 | | |
Distributable income
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| | | | 149,872 | | | | | | 2,500,668 | | |
Distributions paid or payable to unitholders
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| | | | (149,194) | | | | | | (2,486,645) | | |
Amortization of royalty interest in gas properties
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| | | | (1,447,552) | | | | | | (3,973,099) | | |
Impairment of royalty interest in gas properties
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| | | | — | | | | | | (25,154,559) | | |
Trust Corpus, End of Period
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| | | $ | 17,133,939 | | | | | $ | 18,218,080 | | |
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Natural Gas
(MMcf) |
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Balance at January 1, 2019
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| | | | 34,946 | | |
Revisions of previous estimates
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| | | | (1,645) | | |
Production
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| | | | (3,007) | | |
Balance at December 31, 2019
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| | | | 30,294 | | |
Revisions of previous estimates
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| | | | (2,737) | | |
Production
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| | | | (2,573) | | |
Balance at December 31, 2020
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| | | | 24,984 | | |
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2020
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2019
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Future cash inflows
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| | | $ | 40,441 | | | | | $ | 70,836 | | |
Future production costs
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| | | | (24,734) | | | | | | (29,415) | | |
Future net cash flows before discount
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| | | | 15,707 | | | | | | 41,421 | | |
10% discount to present value
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| | | | (6,976) | | | | | | (19,474) | | |
Standardized measure of discounted future net cash flows(1)
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| | | $ | 8,731 | | | | | $ | 21,947 | | |
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Standardized measure, January 1, 2019
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| | | $ | 37,336 | | |
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Net proceeds to the Trust
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| | | | (4,146) | | |
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Revisions of previous estimates
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| | | | (1,192) | | |
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Accretion of discount
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| | | | 3,734 | | |
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Net change in price and production cost
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| | | | (10,984) | | |
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Other
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| | | | (2,801) | | |
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Standardized measure, December 31, 2019
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| | | $ | 21,947 | | |
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Net proceeds to the Trust
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| | | | (1,703) | | |
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Revisions of previous estimates
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| | | | (957) | | |
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Accretion of discount
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| | | | 2,195 | | |
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Net change in price and production cost
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| | | | (10,396) | | |
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Other
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| | | | (2,355) | | |
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Standardized measure, December 31, 2020
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| | | $ | 8,731 | | |
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2020
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2019
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Audit fees(1)
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| | | $ | 152,000 | | | | | $ | 157,000 | | |
Audit-related fees
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| | | | — | | | | | | — | | |
Tax fees
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| | | | 205,000 | | | | | | 220,500 | | |
All other fees
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| | | | — | | | | | | — | | |
Total fees
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| | | $ | 357,000 | | | | | $ | 377,500 | | |
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| | | | ECA MARCELLUS TRUST I | | | | | |||
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By:
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| | THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee | | | ||
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By:
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/s/ Sarah Newell
Sarah Newell
Vice President |
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Total
Proved Developed Producing |
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Net Reserves | | | | | | | |
Gas – MMcf
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| | | | 24,984 | | |
Income Data ($M) | | | | | | | |
Future Gross Revenue
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| | | $ | 40,441 | | |
Deductions
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| | | | 24,734 | | |
Future Net Income (FNI)
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| | | $ | 15,707 | | |
Discounted FNI @ 10%
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| | | $ | 8,731 | | |
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Discounted Future Net Income ($M)
As of December 31, 2020 |
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Discount Rate
Percent |
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Total
Proved |
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9
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| | | $ | 9,130 | | |
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12
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| | | $ | 8,034 | | |
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15
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| | | $ | 7,186 | | |
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18
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| | | $ | 6,510 | | |
Geographic Area
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Product
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Price
Reference |
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Average
Benchmark Price |
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Average Realized
Price |
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North America | | | | | | | | | | | | | |
United States
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Gas
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Henry Hub
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$1.985/MMBTU
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$1.62/Mcf
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| | | | Very truly yours, | |
| | | |
RYDER SCOTT COMPANY, L.P.
TBPE Firm Registration No. F-1580 |
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Stephen E. Gardner, P.E.
Colorado License No. 44720 Managing Senior Vice President |
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| SEG (LPC)/pl | | | | |
1 Year ECA Marcellus Trust I Chart |
1 Month ECA Marcellus Trust I Chart |
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