Antero has approached us wanting to put a pad on our farm. We received a map from them showing
the units coming off this pad, Our unit is half the size of the other units, they told us we would have
approx. 2 wells & the other units would have 3 but we would have a share in the other units. My
question is why is our unit the smallest unit when the pad will be on our farm? Thank you,Connie
Tags:
Between Bearsville & Mountain, where are you located?
Hi ... Thanks for the reply. We are on Buck Run and Antero is in the area.
They bought and are buying leases from Triad/Magnum Hunter ...
One thing I have learned, with working closely with Nancy Mosley on our holdings,
and Kyle ... we 'innocents' need an Attorney in Gas&Oil to review any contracts we
get from the Oil Companies. I would recommend it with you ... since they are close to actually drilling and doing something. Congrats!!
Boy, that word spacing above ... came out weird ...
Suzy,Thanks for the info. we have been going back & forth with Antero for
over a year concerning this pad, I will be glad when it is over one way or the
other.
Be very glad. The smaller the unit, the larger the percentage ownership per acre and the larger the check. When you have a real small piece of a unit you are low rung on the pole for royalty payments.
Hi William ...
I have my Stupid Hat on today, being Tuesday ...
you referenced a 'smaller unit' having a larger check ...
but low on the ladder for royalty checks? Do you mean
a smaller well on the pad gives a larger check? Two different
'units' referenced? Again, wearing My Stupid Hat.
Let's say you have a 5 net acre tract. If all of it is included in one unit, your interest in the unit is 5 acres / # unit acres. So as a percentage, the larger the unit, the smaller the percentage. You would have a 5% interest in a 100 acre unit, but only a 2.5% interest in a 200 acre unit. This fraction, whatever it may be, times your royalty percent is your interest in every well that is included in the unit. So at 12.5% you would have a .00625 interest in each of 2 wells for a total well interest of .01250. And if the unit was twice as large, you would have a .003125 interest in each of 3 wells for a total well interest of .009375. In this case a unit half as large produced a total well interest that is 1/3rd larger than what it would have been with the larger unit, even with 50% more wells. Assuming all the wells produce about the same, you are usually always better off with a smaller unit size.
The low rung comment was aimed at small royalty checks only get cut once, twice or 4 times a year. And yes, it is the size of the check per well that determines that. So again, you want the highest interest per well you can get.
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