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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Are you factoring in one formation or multiple formations?

Hi Everyone,

As stated above these are not my calculations. As per range resources most recent company presentation:

56% of horizontal dry gas  Marcellus wells drilled by

industry in SW PA have projected recoveries from

5 to over 20 Bcf per well.

Range is referring to its "super-rich Marcellus" in SW PA. Based on this estimation, Marcellus gas .org is probably on the mark. Not every area will produce these superior numbers. Cabot has stated EUR dry gas numbers even higher in their best areas in NE PA.

This then is post production data regardless of number of lateral?

What is being discussed here is the "per lateral" lifetime production.  The Range example David Perotto mentioned is for a 4500 foot lateral.

Wet, dry, location, location, location, hard to define a typical well. 

Phil

I'm sure that 4Bcf is per acre not per well. So a 1000 acre unit after all 10 wells produce for their life. I crunched the numbers some time back and that's real close to my results, using ranges GIP numbers. I posted it on a selling rights discussion.
Now as I stated then that was the Marcellus. There are other plays above (Rhinestreet and/or Burket) and below (Utica) just to name 2 most recognized ones. There will be others later.
That seems a little low. However you are using the dry gas numbers.

Unit size is not listed.  If the unit is 640 acres and they only drill one well (unlikely but still worth noting) then the royalty is worth about 10% of the value stated in this formula.  Back out the numbers and you'll see that this assumes a unit size of less than 70 acres.  Even an 80 acre unit (which is going to start happening more in the Marcellus) isn't $24,000/acre.  I'd like to get a closer look at the formula.  I wonder if they're using the standard PV10 (I'm doubting it) because that number seems high for the values given.  Using Ohio's 500' spacing rules a 6,000' lateral needs at least 160 acres.  So a little more clarity in how they arrived at this would be nice.

Is the number net or gross?

If state-of-the-art technology only allows 30% of the minerals to be harvested, shouldn't the math not be by the full acre but the fraction?

Ron,

Something like a 30% recovery rate is assumed in the calculation.

Phil

Consistent with what I have been hearing conservative (low) estimate $100/acre per month for 20 years on average.   100*12*20=$24,000.   Average performing dry gas well.  

Dave,

Who told you that?  Because if they're someone that you're friends with you should probably find new friends.  If it's someone whose information you're paying for you need to ask for a refund as soon as humanly possible.  If it's someone you work with you should probably try to get them fired because eventually they will do something stupid that affects your life.  That is my advice. 

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