ROYALTY VS. BONUS MONEY

 

When we were getting ready to sign our lease 2/12 years ago, the landman (among others including this site) told us that "royalties will be a LOT more than the bonus paid"

 

OK, if you say so, I'll believe you, I have no way of knowing....

 

Also, at that time, doing due diligent research (on this site among others), it was said that 1/2 of all the royalties would come in the first 5 years, the rest would come in the following 40 years or so.

 

My question: if you are getting royalties, will your 5 year payment or estimated payments exceed your bonus payment/per acre? When did it exceed your bonus? 1 year, 2 years 4 years? Will it ever?

 

If not, did they "overpay" us on the bonus? Or are the wells not producing the way they thought? Are they choked off that much? Or are they stealing that much from you? All of the above?

Views: 3431

▶ Reply to This

Replies to This Discussion

Permalink Reply by G.H. on August 5, 2015 at 12:05pm

lol

Permalink Reply by mike4t on August 5, 2015 at 7:50am

Dave

This is what I was looking for, THANKS!

I will be happy to know that when and if I get put in a unit that my first year's royalties will have a chance to exceed my initial bonus monies.

FYI for all the bickering people- I signed what I thought was a decent lease for my area, in excess of $3,000 and 18%, no deductions, so if I make $3,000/acre in the first year, I will have a smile on my face

Thanks again Dave C!

Permalink Reply by Kevin on August 5, 2015 at 11:08am

 Every case can be very different.  It took 15 months for my royalty money to exceed my bonus money. One well started producing in 5/13 and two more in the late spring of 2014.  As I type they are up there drilling two more wells in between the existing three to reduce the 1000ft spacing down to 500ft.  

  I feel very lucky that my lease was purchased by Southwestern Energy from Chesapeake in 2011, I believe. 

Permalink Reply by Indiana Smith on August 6, 2015 at 12:46pm

Last month, I did not receive any royalty check from CHK because the total owed was less than $100.  So the royalty amount had to be less than $7 per acre.  The previous month was $14 per acre.  This well is less than two years old and I have a 18.5% no deductions lease.

Total of the royalties to date is about $2000 per acre.  Most of that was in the first 3 months of production.  My signing bonus was $5250 per acre.  It is going to take a long time to exceed the bonus at the current rate.

I wish I knew if they are stealing or if they have the well choked.  Does anyone know if there is a time limit on doing an audit (my lease allows one per year) and then suing for recovery?  I know that breach of contract in Ohio has a 6 year statute of limitations. 

Permalink Reply by James T Monyak on August 7, 2015 at 2:21pm

If the price of NG was $5 and there were another wells drilled per unit and your signing bonus was $3k per acre @12.5% royalty, one would have their signing bonus amount again in three months.   Change any of these variables and you increase or decrease the payback time.

 

Note:  Almost forgot, if some of your acres are not in the unit, increase the time-line.

 

Something the think about.  What if they drill a Utica wells at the same time on the same well pad?  :)

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on August 7, 2015 at 4:26pm

Mike4t,

     Like you I was at meetings where DPS Penn said "The Bonus Is Nothing, The Royalty is Everything".

Knowing that O&G Companies have been swindling landowners for 110 years, I knew to go for a maximum bonus and ignore DPS Penn.

That was in 2011 when O&G Companies were trying to lease Ohio. The PA landowners were being paid huge sums per acre and some millionaires were made in Carroll County, OH.

I know for a fact those who were making large Royalty amounts prior to 2014 are now planning lawsuits to recover their losses. Around 2014 some O&G companies shifted into their Maximize Profits Mode for no reason other than the greed they exhibited in Texas, Louisiana and other shale play states.

In Feb 2014 the Oil, Natural Gas and NGL prices were high but my first 3 months royalties were $56 per acre per month, along with everyone at Buck Well 1H. There is no excuse except theft for such a low payout.

If you live in Ohio and are under production by CHK and can show that you were paid a Royalty for Natural Gas Liquids after all of the deductions for processing someone else's NGLs you could win the NGL Royalty Challenge.

Show me you made one dollar after deductions for NGLs and I'll give you one of my months royalty payment for 2 acres at Buck Well 1H ($32).

If your Royalty Statement is full of Negative Signs like most landowners under production, you can do the math and see that the negative amount YOU PAID is more than the positive amount you were paid for NGLs. If someone asks you what the Negative Signs are for, you can say with confidence "THE NEGATIVE SIGNS REPRESENTS THEFT!". 

You can also listen to those who say O&G is so very complex that you can't understand what is happening. Or the producer that recently told a landowner that the price they owed him for one year of Natural Gas payment for a well on his property couldn't be calculated due to the fluctuation of gas prices.The price of Natural Gas for one year could not be calculated?Maybe not on your fingers but definately on a school child's calculator.

The company had no problem reporting their profits from Natural Gas sales in the US to the US Government, but played dumb for the landowner. Please sign this Lease Addendum and we will pay you something, they told him.  

If it wasn't for OPEC our well product loses in Ohio would have been in the Billions by now. Like my neighbor said "If they aren't going to pay us for what they take they can leave it in the ground". I agree with him. Someday when laws are in place to protect the Appalachian Shale Play States, then the producers can drill. Until then Ohio Landowners will lose. Mark My Words.

Permalink Reply by Paul Martinelli on August 7, 2015 at 4:51pm

Ron....I think I read someplace that the NGLs in the gas stream are calculated  as negative revenue  because: it has to be processed out of the NG before the NG can be sold. The cost of extracting the NGLs exceeds the value of the NGL products.

I don't buy that load of crap or a minute.

Perhaps all this downswing in NG/OIL prices will lead to something good in the end. I see CHK is looking to sell assets in OH.

Permalink Reply by Dexter Green on August 7, 2015 at 7:07pm

"Also, at that time, doing due diligent research (on this site among others), it was said that 1/2 of all the royalties would come in the first 5 years..."

Anyone who said that was lying through their teeth.  80-85% of the revenue will be produced in the first 24 months.  

Permalink Reply by Joseph-Ohio on August 7, 2015 at 7:49pm
Or until they decide to wait with their profit making attempts and choke the wells back, HBP and wait for better sell prices.

Only a thought / idea / theory as to what may be happening and due primarily to the oil price decline thanks to SA / OPEC.
Permalink Reply by James T Monyak on August 10, 2015 at 9:20am

No one knows the percentage because there are several variables that make up the royalty amount. 

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service