Future royalties/decline rate....something to ponder

I've heard it all, but what's the truth. Does anyone really know how fast and how much royalties will decline? I have seen the decline (with mine) within the first year, but will they eventually stabilize? When I first signed, I was told the royalties would stay high for 4 years before a drop occurred. People are being told the wells will produce for 20 years or more. What would royalties be in 20 years? This is going to be very interesting.

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Permalink Reply by Mike Fulper on April 28, 2015 at 9:49am

The answer is to NUKE the middle east...

Been a problem for nearly a couple thousand years..

Permalink Reply by Tim Tarr on April 28, 2015 at 5:45pm

Mike,

LOL

  Give it time. They'll do it for us. If When Iran gets a nuke Saudi will buy some good one's probably hydrogen fusion. Not the 1950's one's Iran builds. I'm willing to bet Saudi already has a few.

  Now if Iran is crazy enough to attack Israel, There is no question Israel has Nukes. I'm sure Israel has the Neutron Bomb. Developed with the Afrikaner Government in South Africa (1980's). Along with plenty of Uranium (Gold Mine "Waste") shipments back then.

Permalink Reply by Mike Fulper on April 29, 2015 at 2:22am

The Jews stole OUR Nuclear secrets in 1950

Rosenbergs..

Only COUPLE to be EXECUTED for treason...

Permalink Reply by Gary L on May 5, 2015 at 4:31pm
Permalink Reply by Gary L on May 5, 2015 at 4:38pm
Permalink Reply by Jeffrey Beunier on April 28, 2015 at 6:59am

If you think about the difference between oil and gas (size of the molecule) it helps explains the difference in the drop off (if all factors are held the same and just the product is different) - oil is much larger and it has a tougher time getting to the well bore as compared to the smaller gas molecules.  You may have also noticed that in leases, especially in older boiler plate leases, the unit size is different for oil and gas - gas units are almost always bigger than oil units, because the drainage radius/area of a well is much larger.

Permalink Reply by Joseph-Ohio on April 28, 2015 at 7:10am
No disagreement re: the molecular physical science.

Just questioning how much of the so-called 'decline' is attributable to it vs. how much 'choke back market management' is going on and affecting the low production numbers (considering the 'oil glut' brought about by SA flooding the market with their 'bargain basement' $ / barrel oil).
Permalink Reply by Jeffrey Beunier on May 5, 2015 at 5:03pm

I think that a lot of 'choking' is going on - actually, if you read the articles by the midstream guys out recently (Williams Partners, etc) there is a significant drop due to choking.  Also infrastructure constraints, - if the lines are already full, and you bring more on, it has to displace something.

However, I think he indicated in a post that certain components are up (NGL, and others are down).  Year 1 decline rates (unless a restricted choke program is utilized) is pretty steep - 60% - 80%, the thought that these wells will be producing in economic quantities 50 years from now, is difficult to see.

Permalink Reply by Joseph-Ohio on May 5, 2015 at 11:14pm
I also think so Jeffrey.

The fact is that any drop off in 'production' can't all be due to well 'decline' (well 'decline' defined as it's capability to produce due to depletion).

Everyone should realize that there's a lot of 'throttling' going on.

These days (being as cynical as I am) I would guess most of the production drop off would be due to 'throttling' / 'shutting in' (as opposed to well 'decline' / 'depletion').

Just my best guess on it (from where I sit in the nosebleed section).
Permalink Reply by Joseph-Ohio on May 6, 2015 at 12:21am
http://shalegasreporter.com/news/antero-pays-9-million-delay-termin...

Take the above link and check out what Antero's doing.

Helps make my point.
Permalink Reply by Philip Thackray on April 27, 2015 at 11:40am

EQT decline curves

Note that the dry gas wells decline faster than the wet wells.  I also agree with Mike Fulper, the very wet/condensate wells decline very fast.  The large oil/condensate molecules need good gas pressures and volume to bring the oil/condensate to the surface, the natural die off of gas pressure causes a large drop off in oil/condensate volumes.

The shape of the EQT curves is probably right but I thing the volumes are exaggerated just everybody else does.

Phil

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Permalink Reply by Jeffrey Beunier on April 28, 2015 at 7:03am

interesting observation - thank you

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