Netback

Producers measure the value of any given sale on the basis of a netback calculation. This calculation takes the price of gas in the marketplace and subtracts the transportation, gathering, and processing costs, thereby netting a wellhead price. Producers with market alternatives will calculate the netback from various markets to determine which market is most lucrative. And if it is more lucrative to sell gas at the wellhead, the producer will choose to do that.

Buyers of gas often make the same sort of calculation but beginning with the cost of supply in the basin and adding the various transportation and processing costs. This is called a netforward calculation.