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Permalink Reply by Philip Thackray on October 10, 2014 at 1:25pm

Robert,

In the last four years only the Shell Renick Pad was permitted in Center Township.  I suppose that is now a Rex Pad.  Shell drilled wells to the Marcellus, the Upper Devonian and the Utica.  Only Shell and now I suppose Rex knows what they found as the wells were never produced.

See if Rex is interested in moving into that area.  To get a Present Value, you would need a decline curve for wells in your area and that information does not exist.

Assuming a 4 billion cubic feet (lifetime) well on 80 acre spacing and $4.00 gas and 12.5% royalty that would yield $25,000.00/acre to the royalty owner over the lifetime of the well.  Fit that to a decline curve and make a discount rate guess and you could find the PV of the income stream.  If multiple shale layers are economic then the numbers go up.

It is also possible that no shale layer in your area is economic at current prices.

Lots of guessing required to get any numbers at all.

Phil

 

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Permalink Reply by Robert Allingham on October 10, 2014 at 4:40pm

Phil T., Thanks a lot for your help and time explaining this to me. Rex is moving into the area but I appear north east of current pad and production area and can only be in a production unit if they put in a pad south east of me. Just trying to figure out a rough guesstimate adding in as many variables as I can think of- such as my age, location, shale thicknesses, etc., vs the reputation and offer from the company mentioned. I don't believe the current offer for my minerals is enough, but trying to figure if I should hedge my bet and sell part or not. Only time will tell what the correct answer is. Still trying to acquire as much info as possible.

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