Question re Royalty Calculator

I posted this in the comments under the royalty calculator, but I figured I would post it here, too.

What is the correct way to use the "No decline rate? Click "calculate" to view daily production" page (page where you enter the % decline for each of 20 years)? I'm assuming that you choose the percentage of the well's decline each year, and that it drops off more quickly in the early years. But, is there an accepted level of decline for each year? I realize that this is all estimating and that no two wells are alike, but I'd just like to make sure I'm doing things correctly.

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 19, 2014 at 8:44am

That's not an easy question to answer.  First year decline should be ~60-70%, give or take.  Second year is maybe 40-50%.  From there you'd see maybe 10% per year until terminal decline (which could be year 8 or year 20, we just don't know yet).  But all of that could go out the window if new data points pop up.  Antero saw ~65% decline in the first 30 days with one of their Utica wells.  So will that decline taper off after a few months?  Will it plummet 90% in the first year and remain steady then for five years after that? Who knows?

Permalink Reply by NYPAShale on March 19, 2014 at 12:07pm

OK, thanks for that info. So, pretty much plug in whatever numbers you want just to see how different scenarios might look.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 19, 2014 at 12:36pm

I mean, you can manipulate the thing in every way imaginable, so don't expect it to serve as an accurate guess. 

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