Replies to This Discussion

Permalink Reply by James T Monyak on December 4, 2012 at 1:12pm

I am getting around $5000 per month.  I most likely have over the $70k towards the end of my second year.  Why would any one sell at that price when they can receive royalties for 25-30years?   It's not hard to figure out since there are royalty calculators available on the internet.   

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Permalink Reply by James T Monyak on December 5, 2012 at 4:55am

Estimated Value of Royalties using actual production numbers.

• What if…..Royalty Calculator
  Want to know  "What if you participated in a well and…" ?
  (Enter figures in yellow boxes only…and watch what it does to the bottom line)
  IF Your Acres in Production Unit were	6	Acres	Acres you have leased
  And the total Acres in Production Unit were	170	Acres	Typically 400+ acres
  And your Royalty % from your lease was	0.15	decimal	Enter as a decimal
  Then Your Royalry Share is	0.005294118
  If the price for Natural Gas is	$                5.50	Mcfe
  And your daily production was	15.00	MMcfe
  Then the  TOTAL value  of well Production/day is	$            82,500	per day
  AND…..
  Your initial royalty on "day one" would be	$            436.76	per day
  Based on experience in the Barnett Shale we might expect royalty income to look like this.*
  Initial first day production x 365 days	$          159,419	Start point
  Year 1	$            47,826	per year (average)	0.3
  Year 2	$            35,869	per year (average)	0.75
  Year 3	$            26,902	per year (average)	0.75
  Year 4	$            25,019	per year (average)	0.93
  Year 5	$            23,268	per year (average)	0.93
  Year 6	$            21,639	per year (average)	0.93
  Year 7	$            20,124	per year (average)	0.93
  Year 8	$            18,715	per year (average)	0.93
  Year 9	$            17,405	per year (average)	0.93
  Year 10	$            16,187	per year (average)	0.93
  Year 11	$            15,054	per year (average)	0.93
  Year 12	$            14,000	per year (average)	0.93
  Year 13 - Refraced	$            21,000	per year (average)	1.5
  Year 14	$            19,530	per year (average)	0.93
  Year 15	$            18,163	per year (average)	0.93
  Year 16	$            16,892	per year (average)	0.93
  Year 17	$            15,709	per year (average)	0.93
  Year 18	$            14,610	per year (average)	0.93
  Year 19	$            13,587	per year (average)	0.93
  Year 20	$            12,636	per year (average)	0.93
  Total Principal Value of Royalty for a 20 Year $414,134		TOTAL

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Permalink Reply by J Hankins on December 5, 2012 at 5:00am

James,

The well(s) is going to decline roughly 70% in the first 12-18 months. Your current check of $5k a month will most likely be $1,500 month.

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Permalink Reply by James T Monyak on December 5, 2012 at 5:15am

The model I used does have the decline curve in it.  Bottom line is that one acre is worth around $70k per acre when drilled.  I am selling my Clearfield acres at $3500 per acre.  When they start shipping the Natural Gas to Japan and China, I would suspect the price of Natural Gas will double.  How much is my acres worth if they decide to drill the Utica well too? :)

Marcellus is real and I can't wait till they drill my Clearfield acres. 

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Permalink Reply by J Hankins on December 5, 2012 at 5:30am

If I had an offer of $3,500ac in Clearfield I would most likely accept.

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