How much royalties per acre?

I live in Belmont County. I own 170 acres and am under lease to Gulfport. About 100 acres of my land is "landlocked", situated between interstate 70 & Gulfport's Eagle Creek well so it is very unlikely it will ever be drilled. I'd heard that the other 70 acres might be including in a drilling unit in 2021. 

   I've received an offer to buy the mineral rights for the whole 170 acres, not just the 70 acres. I'm trying to decide whether to sell or not. One consideration is how much I might make in royalties if I were to wait & they'd actually drill under the 70 acres.

I'd like to see if any people could give me an estimate of what a monthly royalty check might be per acre with a 15% royalty percentage. That might help me decide.

  I know there are people out there who say you're a fool if you ever sell your oil & gas rights. I'm not interested in that noise. I'd just like to have some guess as to what I might receive in royalties so I could weigh that against the offer of a sure thing now.

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Permalink Reply by Bluflame on January 15, 2018 at 7:49am

Deutchen,

   Your property is in the wet gas zone. Gulfport has most of the acreage in your vicinity. Per their investor presentations, they've settled on 1000 ft spacing for wet gas wells, and historically have drilled 8000 ft laterals. Of course that could change, but both Eagle Creek and the Family well pads have three laterals on 650 acres. Conservatively, I'd recommend using those numbers for royalty $$ calculations. GPOR hasn't drilled in the wet gas zone for the past few years, and has stated they do not intend to do so in 2018. That could also change as NGL prices have risen nicely recently. The bad news is wet gas in your area needs to be processed twice through both MW's Cadiz gas processing plant to separate NGL's out of the gas stream. Thereafter, the resulting Y-grade is sent to their Hopedale fractionator for separation into NGL components. This is an expensive proposition and explains why no wet gas drilling has occurred in Belmont county the past few years. 

  As others have stated, it's all a craps shoot. Welcome to the Oil & Gas world!

BluFlame

Permalink Reply by John b NABORS III on January 16, 2018 at 5:25pm

You have made one very erroneous assumption: namely, that a portion of your property is landlocked and thus can’t be produced because it can’t be drilled.  Taint so.  Here in Louisiana, I just received notification of Chesapeake requesting permitting on two cross-unit-laterals (CUL) which will run nearly two miles laterally about two miles beneath the surface.  They will be producing my minerals from a wellhead 1.5 miles away.

I strongly suspect that drilling procedures in your AO are similar.   No oil company needs access to your surface area to drill a lateral well to extract your minerals.

So if you are making any calculations based on the assumption that your acreage can’t be produced...

you need to go back to Square One and refigure.

good luck

Permalink Reply by Spring on January 20, 2018 at 5:30am

I have a similar question to the laws about drilling under interstate roads, and that is railroads.  Who regulates/decides that issue?  Is it a governmental agency or is it case by case decision made by the railroads themselves?   Are there units that include rail property? 

 

Our lease was not renewed and part of the reason cited was proximity to tracks which border land on two sides. 

 

Thank you for all the valuable information offered here.  I live out of state and this site has kept me informed of issues through the years. 

Permalink Reply by Al Cramblett on April 19, 2018 at 4:11am

I know everyone would like to know the value of royalty payments being received. I will provide my number for wet gas wells in North Township, Harrison County, Ohio for the month of January, 2018.  These wells have been in production for 5 years.  My royalty payment is approximately $15.00 per acre in the drilling unit per 1% of royalty ownership.  Thus, if I owned 100 acres and was receiving  20% royalty, my January 2018 royalty check would have been approximately $30,000.

Permalink Reply by David Cain on April 19, 2018 at 5:08am

Al,

Thank you for sharing.  What kind of production decline have you seen since your well has been in production for 5 years?  Did production drop off significantly after the first 8-10 months?  Or have the wells been so restricted that production hasn't changed much over the 5 years?

Regards,

Dave

Permalink Reply by Al Cramblett on April 19, 2018 at 5:41am

The largest impact has been the price of oil and gas.  There has been very little decline in the last 3.5 years.

Permalink Reply by Bluflame on April 19, 2018 at 6:04am
Similar experience in Belmont County near Morristown
Permalink Reply by Dott on April 19, 2018 at 9:52am

Thank you Al,  Is the $15.00 per acre after deductions or do you have a no deduction lease? 

Permalink Reply by Al Cramblett on April 19, 2018 at 10:12am

This amount goes directly into my wife's pocket.

Permalink Reply by Lynn mudder on April 20, 2018 at 7:57am

Thank you Al, that was helpful info and we appreciate you sharing that info.  I assume these figures are for one well.  If you had perhaps 5 wells, you would multiply by 5.?

Permalink Reply by Inchworm antenna on April 19, 2018 at 10:46am

In my humble opinion you would be foolish to sell for the following reasons that I believe: 1. We have numerous NG power plants planned in Ohio and have two huge cracker plants planned in Utica shale locale.  This will likely drive up demand.

2. If demand goes up then price may too.

3. How much money do you really need RIGHT NOW? That you are willing to separate yourself and your heirs from potentially greater value in your natural wealth than what some investor is willing to pay?

4.  Think about your community.  You sell and it will be likely to some out of state LLC. Whom will spend future royalty money where they reside.  Royalty income will be taxed where the LLC is based.  Ohio and your community gets little other than a minerals property tax parcel created when the minerals are severed.  It will be like sending your minerals out of state.

5.  Once they are gone they are probably gone for good.

6.  If you want to sell for the sake of your community and and the natural wealth within OHio maybe find some farmer in Ohio collecting royalties already.  They should probably give you a good price because they will truly understand the value.  You'd get your money, and things stay local, and you won't be a sell-out to the carpet baggers.  

Good luck. 

Permalink Reply by JKis on April 25, 2018 at 7:37am

I agree with those that say it all depends on how many wells are drilled in your unit.  And I also agree that folks don't like to talk about their royalties.  But I'm willing to share my experience:  Bradford County, 5 wells, mainly in one unit, 30 acres, 20% royalty, Royalties began in late 2014.  Up to the end of .2017 we had received about $700,000 not including the bonus.  that's $23,000 per acre, so far and about $4666/well/acre.   Production now dropping but did not drop until recently.  2017 was the best year yet.  Maybe due to throttling the wells or price of nat. gas, I don't follow it that closely.

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