North Township Production Numbers

Okay folks, I promised production numbers which are provided below. However, I feel compelled to also provide my personal perspective on the production numbers. Many folks have spent a lot of time trying to estimate their royalty amounts. I never did because I thought that was a futile effort, the reason being that all wells are not created equal. I am now drawing monthly royalties from 5 well's. The production variance among these welds is as much as to 200 percent. There are also other factors that must be considered as follows:

1. Is the land fully developed? By this I mean the land in the drilling unit needs to be basically in a rectangular shape with laterals spaced between 400 and 500 feet apart. All my land is not in a drilling currently. The irregular portions were stripped off and traded to another oil and gas company. The numbers below are for a rectangular portion of my land fully developed.

2. The market prices of the hydrocarbons obviously significantly impacts the royalty received. Also, the market price of natural gas liquids is dependent upon the BTU content. Some of the NGL extracted from by wells had a high enough BTU content to command crude oil prices.

3. The Lease terms you negotiated is the most significant factor. Is your royalty gross or net? Mine is gross.

For all the above reasons, I think it improper for me to provide you royalty income per acre. Instead, the number I will provide is $37.11, which is the per acre per 1% royalty I am receiving. Thus, if I had agreed to a 1/8 royalty, I would be receiving $406.87 per acre per month. While the projected decline curve is significant after 2 years, the wells should be in production for some time.

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Replies to This Discussion

Permalink Reply by Shower Bath on February 16, 2014 at 10:03am

Al, Are the values listed above for one well, or for all five wells in the production unit? Thanks.

SB

Permalink Reply by Al Cramblett on February 16, 2014 at 10:15am

GOOD QUESTION.  All 5, but all were not at full production for numerous reasons.  Folks wanted numbers so I provided them;  the numbers are based upon the royalties actually received in February and I believe will also be proper "order of magnitude" going forward due to the installation of plunger lift systems.

Permalink Reply by TM on February 16, 2014 at 12:27pm
So you are making $80 an acre a month per well then? So these wells will have pumpjacks installed on them? Congrats on the royalties Al.
Permalink Reply by Al Cramblett on February 17, 2014 at 4:09am

TM, please go back and read my post!  I understand how you arrived at the $80 figure but your calculation is a misuse of my numbers. First, I said some wells are producing better that others.  Your calculation treats them all equal.  I provided an example of how to use the base number ($37.11) by using a 12.5% royalty. My actual royalty is higher.  However, I cannot disclose the actual royalty due to confidentiality agreements. 

The plunger lift systems will minimize the loss of natural gas, even out production, and have already been installed.

Permalink Reply by Don C on February 16, 2014 at 10:45am

thanks al

enjoy

dc

Permalink Reply by Booger on February 16, 2014 at 2:26pm

Atlas must know what their doing..........also sounds like they honor gross royalty language...........congratulations al.

Permalink Reply by Josh on February 17, 2014 at 6:37am

Thanks Al, and congrats!!

Permalink Reply by Dan on February 18, 2014 at 4:36am
Thanks Al! And congratulations on some good returns. Are you seeing any signs of the decline curve staring to show yet?
Permalink Reply by Dan on February 18, 2014 at 4:38am
I meant to type "starting" to show yet.
Permalink Reply by Al Cramblett on February 18, 2014 at 6:28am

Dan,

Production is not steady-state yet due to technical issues such as a serious fire at the midstream processing plant. This resulted in curtailed deliveries to the midstream facility. Also, there are too few points to even start plotting a production curve yet.

Permalink Reply by Dennis on February 19, 2014 at 4:21am

Al,

Just for clarity on my part, you are talking about 5 laterals off one pad in the unit? Also if you can share, what is the unit size and are you the only royalty owner involved?

Permalink Reply by Booger on February 19, 2014 at 8:50am

Dennis - see attached

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