Royalties Plummeting at a More Rapid Rate - EQT Improvement under Rice Mgt?

Hello. It's been a while since I've been on here but I have a question for everyone I'm really curious about. Has anyone else noticed a sudden increase in plummeting royalty payments and market prices? I'm obviously not oblivious to the fact that the market has been steadily dropping for a variety of reasons and a lot of gas companies are dialing back production due to falling prices BUT the most recent market price seems to be twice the drop - at least  in my area. We are with EQT; former Rice Energy landowners, and bought stock and fought to vote the Rice team back into management positions at EQT after abysmal performance and poor relations over the course of EQT ownership of former Rice leaseholds. We had - and still have - confidence in the Rice contingent to turn things around for EQT but are currently questioning if it will be advantageous for their existing landowners and producing units. This months' ridiculously low sales accompanied by apparent lack of interest in advancing existing producing units have brought questions to mind. We attended the EQT Land Owner meetings with Toby Rice and a lot of emphasis was placed on returning to existing pads and drilling additional laterals, thereby saving prep costs, increasing production, and lowering drilling costs. They cannot - of course - affect falling market prices, however we haven't seen any attention being paid to existing units, which seem to be being let to slowly (and lately NOT so slowly) fizzle out. Wondering if this is something others are noticing. It would seem to me - logically - that the most financially profitable would be to get the most out of existing units, thereby reducing drilling costs, during this slump in market prices, rather than going to the expense of developing new units and starting from scratch. Just not understanding what is currently happening and wondering if anyone out there has any insight or ideas. Our unit is only 3 yrs old and has had an accumulative 30% drop in royalties over the past 12 mos and a full 30% drop between just last month and this month, which was a complete shock. Curious what others are thinking, though I'm sure it's nothing good.

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That's a good question that goes along with asking how they come up with that monthly selling price they pay us on.

I remember in the beginning of our production someone saying that although Rice Energy did hedge a portion of sales that they would NOT hedge landowner sales. The reasoning then was that the gas hedged was guaranteed the hedged price whether the market went up or down. AT the time, prices were up so hedged sales could provide a loss which they did not want to force landowners in to, it being basically a gamble. Turned out that the many factors causing the gas mkt prices to decline and the huge glut of gas reserves in the region to further decrease sale prices, the hedged prices were a good gamble because they ended up being higher than what the mkt was. I don't know how EQT prices sales or if they hedged landowner portions of gas sales but I do know that Rice didn't.

Dennis, I've had accts on both sites with notification updates for my area for a few years and have used Landex several times, myself. Both are excellent data sites. DEP permit info is one of the unexplained areas when I get notices of new permits and additional laterals being drilled on other units consistently around us. Also, have seen a permit filed for on our pad that was renewed twice but over 3 yrs, nothing came if it and it expired. Another good data site go go to is

www.marcellusgas.org.  

It's a subscription siite but updates monthly productiongion, sells well packets and maps, and has a crowd sourced monthly sale price link with all of the area's companies and breaks it down by several different parameters, based on submitted info from landowners. It's inexpensive and I highly recommend it.

These forums are valuable for landowners to stay connected with others and watch for inconsistencies. We really don't have anyone looking out for us but ourselves. I appreciate all of the info from everyone.

Lori:

I feel your pain! It's only going to get worse before it gets better. This is why older folks really should consider liquidating when they can because the volatility in royalty is painful! There's no 'catch' to selling! The market is in total turmoil. It's not what it used to be and nothing is ever a guarantee. I hope your checks get better. 

I seriously considered selling my mineral rights before I started getting royalties precisely because of market volatility and that the only FACT I believed I could count on was uncertainty. So far I'm doing OK with royalties but the buy-out offer I got was about 25% more than I've received. I estimate it will take me about two more years to know for sure if I made the right decision, and I certainly don't expect royalties to continue that long. They may or may not, only time will tell. 

Unfortunately I agree with both comments re: royalty futures. Basically, we don't know. "Promises" loosely projected 5 yrs ago were so over-inflated that plans made in regards to royalty finances are not much more than wishful thinking and fantasies. In defense of royalty owners, however, companies presented a hard sell and backed it with concrete financial data and mkt analysis. Despite buying in to the drilling companies projections, I always had a "bird in hand" thought, whether in the back of my mind or up front. Nothing is guaranteed until it's in your hand. Older royalty owners probably would benefit from selling rights with mkt as it is but I also have stories of people I know who sold their minerals and, going g by our own royalties, lost more than 200% over just a couple yrs vs what royalties would have pd. I've heard projections that the market will level out once pipelines and gas fired power plants are completed, creating more of a market for what has become a glut in our region. I am positive that we will not sell our mineral rights, regardless of the mkt. Those who did 25 or 30 yrs ago are regretting it now (or their family is). Same as the Real Estate mkt crashed in 2009 and home owner's property values put them under water, 10 yrs later those same properties gained and surpassed their values. It's all perspective and if you can hold out. If you're 80 or 90 and have financial needs, by all means, sell. Unless you're very long lived and already financially sound, you probably won't see the market recovery. I'm more concerned at this point that drilling companies are fairly handling g their landowner's intersts and not offsetting the slump in market sales by reducing our share. Merry Chrstmas to Everyone!

Excellent points about how virtually everyone would have been better off keeping their mineral rights and property, historically speaking. 

One element I keep in mind when trying to juggle all these factors is the environmental impact of fracking and its direct impact on the future. It's important to note that Russia, who went crazy when they were denied advanced fracking technology, has financed a concerted effort within our country (and others) to demonize fracking and exaggerate potential negative effects. That said, some of those negative side effects appear to be quite real. Namely, methane emissions. What does the future of fracking look like if methane emissions are to be treated as a serious contributor to climate change? Is there a national security threat element to that kind of forecast, as well? I hope for the best, I hope for continued well production to benefit our country and all of us mineral rights owners, as well as help other countries be less reliant on authoritarian governments like Russia & China for their energy needs. 

Major players do seem to be abandoning shale gas plays for a variety of reasons. Hundreds of thousands of leased acres sold off.  That can't be ignored. The long term future seems to be closer to 100% "renewables" but the short term is uncertain, isn't it!  Maybe there will be an acceleration in green technologies when the major companies put their immense resources towards that end. So how many years away from major changes are we? Two? Twenty? 

Merry Christmas to everyone and may Santa stuff your stockings with royalties! 

Plans made in regards to royalty payments ?
Don’t plan on spending money you don’t have
There are no guarantees in oil and gas
Maybe the company goes bankrupt
That puts a damper on plans for future royalty payments
You just never know so best to proceed with caution when planning your future gas check money

https://seekingalpha.com/article/4314334-natural-gas-going-new-deca...

A spring low

The price of nearby natural gas futures fell to the lowest level since 2016 when they traded $2.029 in August 2019.

Source: CQG

The monthly chart shows that below $2.029, the first level of technical support stands at the psychological $2 per MMBtu level. However, natural gas could blow through that price as a hot knife goes through butter as the critical level on the downside is at the March 2016 bottom at $1.611 per MMBtu. The long-term chart shows that price momentum and relative strength are in oversold territory. Monthly historical volatility at under 23.5% reflects a slow and steady decline. The total number of open long and short positions at 1.27 million contracts at the end of last week was well below the high of 1.622 million in September 2018 when natural gas was preparing to move to a high at $4.929 per MMBtu in November 2018.

Natural gas traded to a high of $6.493 in 2014 and fell to a low of $1.611 in March 2016. The most recent high of $4.929 per MMBtu came in 2018, and a move down to a new and lower low below the $1.60 level during the spring of 2020 could be in the cards. Meanwhile, the low in 2016 turned out to be a buying opportunity, and similar price action during the first half of 2020 could be the same.

Futures don't look too promising at least in the short run, and the article actually paints a better picture than we're already seeing since we sold at just $1.34 for Oct 2019 production (lowest we've seen in 3 yrs). We here would be happy to have seen $2.02 or even $1.61. As we are contracted to receive gross royalties, it still begs the question risen on how, exactly, the gas companies are coming up with the selling price they quote us on our statements when it so often varies significantly from market selling prices. None the less, one thing is sure; we are in a serious slump that appears to still be declining, with no clear picture of a rebound any time soon.

Lori, mind sharing where you are located? Something seems way off base with what you should be getting. We got $2.09 in Tioga Co.

My Last royalty check was for 1.24 per unit from EQT I am in Greene Co. PA. I just wonder if the Gas Co. is telling the truth of production and why is atw price lower than what some say they get. My well has been going for 9 yrs and its not paying very well now. And I think they are drilling on lands where the leases may be ready to expire They don't have to drill on exiting wells as they are held by production they don't have to worry about losing the lease.Just my thoughts They will tell you what you want to hear  

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