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Permalink Reply by David Perotto on February 20, 2013 at 6:29am

So to follow this:

2.578 x 1000 = 2,578 mcf per day

approximately $3 per mcf =  $7734 per day

divide by approximately 130 acres = $59.49 per day, per acre

times royalty of 18% = $10.70 per acre per day before deductions

= $3908 per acre per first year production before deductions.

then the decline...

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Permalink Reply by Tom R on February 20, 2013 at 8:12am

You provide a good demonstration of the required calculations, and agree with the results of the on-line royalty calculators. Only caveat I would offer is that most units are much larger than the 130 acres you used. If you figure on the "standard" 640 acres it comes out to approx. $794 per acre for the first year. May make some folks wonder where amounts that may have been thrown at them when they were being pursued to lease came from. They were not total fantasies, but you have to project multiple wells, better than average production and gas prices from the time the lease was offered.

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