My big drop in royalty check

I'm leased with Noble Energy. My royalty checks have declined due to the low selling price of gas, but

the checks have been decent. I received my latest check today and was quite shocked, The amount per

acre I received from last months check to the current one went from $118.29 per acre to $4.16. Why the

big drop? The wells have only been producing for 2 years now, so there's plenty of gas left. Did they cut

back on production that much? Has anyone else experienced a drastic decline in royalties. I have no

deductions of any kind taken from my checks by the way.

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Permalink Reply by Tom on April 5, 2016 at 8:25am

Keeping on point with the original question.  I'm located in Pa. and was a part of one of the first wells drilled in 2009.  At that time gas was running in the $4 to $5 range and the well volume was great.  After 1 1/2 years in production they shut the well down for 10 days calling it maintenance and when they restarted it I lost 80% of volume.  In retrospect this was not about "decline" but rather about flow control.  While I liked the larger checks I was satisfied to accept smaller ones for hopefully a longer period.  Now fast-forward to 2016.  That same production unit is now supporting 6 wells.  Five wells coming on line in 2015 to accompany the H-1 from 2009.  For the first couple months H-1 was doing its usual and the other 5 were working out their flows.  Now in my last check (January) all flows increased in volume with the original H-1 doubling in volume. That tells me several things: first they are closely regulating the flow based on selling price and forecasted reserves; it also tells me that all the decline models I hear about could be based on faulty assumptions.  Of all the things I've learned in the last seven years I have learned that the O&G companies play it close to their chest. Unlike others on this forum I see nothing wrong with that; it's their money at risk and it's their right. 

So a simple answer to you question; in my opinion, your change in volume probably has nothing to do with well decline but rather to external economic conditions.   

Permalink Reply by David Allen Lilly on April 5, 2016 at 10:55am

Hi Tom, great comment, thank you sir. Please stick around and help us.

Permalink Reply by Annie Miller on April 5, 2016 at 10:27am
I know it is hard to do, but simply be patient. What goes up, eventually goes rock bottom; and what is currently rock bottom, will in time, only have "up" to go.

Sell your mineral rights ? Are you f***ing crazy ? That is turning the hen house over to the fox in my opinion ! Mineral rights, like real estate in general, ( my father always told me the safest investment was land; because no one is making more of it !!!) is only going to appreciate in value.

So your royalty check right now is kinda sad; be patient my friend, no one is making any more gas or oil as far as I understand it. This is what's known as a temporary market fluctuation. Hang in there; try to keep calm, and eventually you will reap more judicious reward for your patience. The house of Saudi is trying desperately to starve out US gas and oil production, and profit.

Above all, don't let the bastard Saudis win their endeavor !
Permalink Reply by David Allen Lilly on April 5, 2016 at 10:57am

I did talk to a royalty owner in an Eclipse unit today. He said his checks are way down but he suspects it is volume AND price. He told me that Eclipse skipped a payment in December but made it up in January and has been good since.

He also told me he has yet to get the dreaded "we over paid you" letter.

He is worried for the solvency of his producer, and so am I.

Permalink Reply by GW3 on April 5, 2016 at 11:20am
annie miller, thats a great pep talk ,and i also had ure same belief in mineral rights, but reality is if the oil companies decide not to pay than they dont have to.. its a screwed up system of checks and balances .. if mineral rights are so great than i shouldnt have a problem selling mine .. as i have acreage in the fritz unit , purple hayes unit , finnerman unit , along with unit in noble county and tusc. county.. all with 20% gross lease ..so coming from an actual mineral owner with acreage in producing units i will tell u hindsight for me is take the money and invest in something u can control or run ..the minute oil prices go up these minerals are sold ..
Permalink Reply by INVICTUS on April 5, 2016 at 11:50am

Sell the rights. Time to move on.

Permalink Reply by David Allen Lilly on April 8, 2016 at 5:57am

GW3, you wont have the slightest difficulty selling your mineral rights, in fact, you will already have been bombarded by those eager to do so.

No matter how you slice it there is no way to dent that for someone to buy your rights and make a return on investment they have to pay you around 10 cents on the dollar.

Perhaps you were talked into selling some already and learned a hard truth.

Permalink Reply by GW3 on April 8, 2016 at 6:19am
I have never sold mineral rights even at offers of 18k/acre , it's the fact that when the oil companies began taking what is rightfully yours, and interpreting leases now that the market is low , that's the problem and decision one has got to make .. I assume u are in wills, millwood, or Oxford townships based on your previous posts .. Be patient your times coming .. And then u will understand ..
Permalink Reply by David Allen Lilly on April 9, 2016 at 12:35pm

GW3, I am on Putney, first house off of 513 towards the Fritz. The guy with the big white Suburban whose house is for sale.

I have been preaching patience and not just advising against selling mineral rights but also explaining how little you get and how much you give up. I have taken a lot of heat for this.

My interest soon will turn to the methodologies used to decipher royalty statements and addressing errors to the point of being paid what your lease says you should be paid. This will likely be done by us through either an oil and gas attorney or accountant specializing in oil and gas.

If you see me out please stop and talk to me, I would love to hear your story concerning the royalties you have been receiving and if you have been treated fairly or not.

1xc6tw2xj1fwlPermalink Reply by 1xc6tw2xj1fwl on April 14, 2016 at 4:50pm

If you turned down 18k an acre you are an idiot.  And the fact that you can say that on here is amazing to me.  You obviously have no idea how money works but let me teach you this first, simple lesson - a dollar today is worth more than a dollar tomorrow.  Let's say you have 100 acres x 18k = 1.8 million.  1.8million you f'ing moron.  How long do you think it will take to receive 1.8 mil in royalties?  Don't forget about half of it is going to the govt for taxes and who knows what you're actually going to get once they take their "deductions" out.  So you could've taken the 1.8 mil 2 years ago and invested it at say 10% return a year.  Assuming that rate, you'd have close to 5 million after 10 years.  I'll be my life you'll never see anywhere near that kind of money in royalties.  Pigs get slaughtered, and you are a filthy pig.

Permalink Reply by G.H. on April 14, 2016 at 4:57pm

I have to agree that 18k per acre is a ton of money.  And to not at least seriously consider that before declining is absurd.  But I have always said on here that selling is not for everyone... and NOR is keeping the mineral rights.  All depends on the specifics of your personal situation.

I always thought selling part, maybe 50%, was an interesting option.  Hedge your bets.  I'm sure I will take flak from both proponents of selling and proponents of holding for making this post haha.

Gebralter, don't be so angry!  You are right that 18k per acre is a ton of money, and you are right that a dollar today is worth more than a dollar tomorrow.  But you don't have to call people idiots haha.

Permalink Reply by GW3 on April 14, 2016 at 7:52pm
Lol, thats funny ..7000/acre to lease .. 8000/acre in total royalties in 10 months .. Based on your post I think u can do the math ..Ya teach me bout how money works ..oink oink

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