Average royalty earned = $24,000 per acre

 

Based on the extraction footprint data we've collected over the years, the estimated life time dollar value of the gas produced by a horizontal unconventional gas well is slightly over

$190,000.00 per extraction acre.

 

If the minimum royalty percentage of 12.5% is applied to this per acre dollar value, the estimated lifetime royalty payments for an extraction acre (an acre of shale from which all available gas has been extracted) is slightly less then $24,000.00

 

The extraction acre production and royalty estimates are based on these criteria:

 

- Lifetime total well production of 4 billion cu/ft

- At the wellhead (ATW) gas pricing of $3.35 per Mcf

- A horizontal drilling bore 6,000 feet in length

- one-eighth royalties based on ATW pricing values

 

These estimates will vary significantly if any of the assumptive values are changed. It's worth noting that our research indicates that the estimated life time well production value of an unconventional gas well varies significantly depending on the source.

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Replies to This Discussion

Permalink Reply by Philip Thackray on October 8, 2015 at 2:27am

Bluflame,

I see check stubs from XTO and Rex.  I was told that XTO does not hedge but Rex does.  I have never seen a "deduction" for the cost of hedging so I think that Rex keeps any hedging loses or gains out of the royalty calculation.  However, this is just a guess.  Maybe things are different with other O&G companies.  No matter how you look at it, there is certainly a lack of transparency.

Phil

Permalink Reply by Bluflame on October 8, 2015 at 2:42am

Hello Philip,

  I see GPOR check stubs, and there is no indication how they determine commodity prices. But, looking at their hedging program on their investor reports, I speculate that hedging is not factored into the price paid to royalty owners. I want to emphasize this is strictly IMHO…..I certainly have no inside information.

  If my speculation is correct and since hedging is not noted in my lease, they are within their rights not to pay the hedged price. It actually seems fair, since they are the ones taking the hedging risk. And it is a risk…..

    BTW, most of the E&P's trumpet their hedging "successes" on their investor reports. Antero seems to have a very successful program.

BluFlame

Permalink Reply by Hopeful on October 8, 2015 at 2:48am

See my answer about hedging above. Companies do not pass along hedge profits/losses to royalty owners.

Permalink Reply by Bluflame on October 8, 2015 at 2:53am

Thanks, Hopeful. Your site name nicely captures the spirit of all of us royalty owners!

BluFlame

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on October 9, 2015 at 4:29am

Let me do the math.  $190,000 divided by $16 an acre per month = 989.6 Years to reach the $190K payout.

The well will be dry in 10 years or so.

Further proof that something is terribly wrong in Ohio.

Permalink Reply by alexandra on October 9, 2015 at 10:14am

I am in SE Bradford County, Pa. and I got less than 40% of that.  Would be wonderful if that ever happened here.

Permalink Reply by David Allen Lilly on October 15, 2015 at 11:45pm

I think your comment violates site policy because it is pure advertisement, not to mention a bad idea.

Smart people do not sell when the market is at a low.

Permalink Reply by David Allen Lilly on October 16, 2015 at 3:44am

Yes, I am serious.

Your comment and link violate site rules, which is why you got "suspended". Yet you knowingly re-posted it.

I suspect you are not accurately representing yourself because you  are involved with those who would give folks pennies on the dollar to purchase their royalties.

Regardless, you are knowingly breaking the rules as well as advocating that which is in my opinion against their best interests.

Permalink Reply by David Allen Lilly on October 16, 2015 at 10:40am

You should try stand up comedy, or maybe circus clown. Yer entire comment is in-accurate but I have dialed you up for what you are.

Permalink Reply by Keith Mauck (Site Publisher) on January 21, 2016 at 12:39pm

I wanted to let everyone posting in this thread know that we have launched ShaleCast. I hope you find it helpful. So far the response has been really positive. Thanks for participating in this discussion. It was very insightful as we put this new site together.

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