Utica / Point Pleasant Royalties Per Month

Hello All, question:  How much money per acre/per month are these folks in Carrolton county getting for their royalties?  I know all wells will be different, some with wet gas, others containing oils.  I'm just looking for a good average.  I'm only 29 years old and sick of working...  trying to determine if I can quit my job now...  Hopefully they don't hit a dry well behind me.  (of course, I'm kidding)

I'm in Southern Mahoning County, but I want info from Carrolton Co.  

Cheers! 

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Permalink Reply by Jim Litwinowicz on July 21, 2012 at 3:36pm

I posted because you ignored the fact the there was only one well in each of those units and therefore your predictions were wrong. And you used $3/MCF which again will be wrong based on all futures trading activity.

And look at our history... we have always gotten landowners the best deal at the time....every time. Ask every landowner that we got them more money than they would have on their own if the fees were unreasonable.

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 21, 2012 at 11:05am

SGJ... I have no particular agenda to pursue here, just thought you might benefit from using actual data as opposed to what you used for your calculations, but as I have already stated, feel free to use whatever data points you wish to adopt.  When you equate them to values on a per acre basis and purport to represent what a potential revenue stream will be you aren't exactly doing anybody here a service when you use "facts and assume more realistic long term assumptions" that defy what every financial institution uses to define value. 

Lastly, my calculations clearly say the landowner royalty is based on gross, not net.

 Actually what you said was "based on 18% landowner gross royalty".  For royalty calculation purposes, the only distinction between gross and net is the amount of Post Production Expenses which can be deducted.  It has no application whatsoever to an overstatement of product sales prices such as you have presented.  The producer "gets what they get" in terms of revenues from product sales.  If crude and liquids simply sell for a discount to posted prices, the landowners royalty doesn't get calculated upon a theoretical higher posted price. 

Lastly, I would never make representations as to what a royalty yield might be.  It would be akin to telling people how long they will live.  There are folks at the carnival that will do so for $1.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on July 21, 2012 at 3:53pm

Devon's venture into the Point Pleasant comes with numbers.  Using their pricing (they have been an industry leader in hedging and price prediction) they hope for NGLs to trail oil at 47%.  

I think the danger to landowners here is being told some fairly lofty things that may never materialize.  Let's forget pricing for a moment.  That is something that is subject to market conditions and never easy to pinpoint, especially many years out.  The real problem is EUR.  Nobody has any bloody idea of what these wells will actually yield over their life and CHK's EUR predictions have been proven to be dubious in other plays.  Add to that the nonsense that these wells will commercially produce for 30 years and you have a recipe for some broken-hearted landowners.  If you are in a unit enjoy the free money.  If it makes you so rich that you don't know what to do with yourself then God bless you.  The majority of people will not be able to retire to a yacht because they get a well.  Guessing at what these are worth without a full set of data is very, very questionable.  Three years from now there will be a wealth of information and it'll be much easier to see the whole board.  For now all we're really doing is making fairly uneducated guesses (myself included).  

Permalink Reply by Big D on July 21, 2012 at 4:07pm

Eventually, wouldn't they drill Utica laterals as well as Marcellus ones, from the same or nearby pad? (we have both formations here, both have gas & oil).  I think..    If I get rich off the royalties, that's great.  The huge upside is I have employment options coming available that I did not have one year ago.  I'm seriously considering looking into a position at the new Shell cracker plant in Shippingport (Pittsburgh).  

I talked to some guys drilling wells across the line in Pennsylvania (about 3 miles from me) they said eventually they will run laterals through Utica and Marcellus in this area.  Shell (Sweppi) will be bringing the rigs over to Ohio next, they said.  Is there any truth to that or were they full of BS? 

 

 

Permalink Reply by Jim Litwinowicz on July 22, 2012 at 1:46am

Dave; you are correct that they will be drilling to different depths from the same pad. Shell is already doing so at the Patterson well near Enon Valley in Pa.

There are lots other strata possible like the Trenton Black River which is deeper than the Utica. And a couple of horizontals have been drilled into the Upper Devonian and gotten good results.

Eventually, it maybe possible to drill into five different strata so you may see 30 or more wells off of a single pad. And you may be collecting your royalties while on your yacht in the Caribbean Sea.

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 22, 2012 at 2:20am

Jim,

It is entirely possible that many different horizons will become drilling targets and it would be great if a well pad could support as many different laterals as you suggest but if so that pad may have to be 75 acres in size.  If you have ever seen a pad during a frac operation you would observe that it is quite a chore to fit all of the frac tanks and the various pieces of equipment required for a frac job.  Well heads, production equipment, water tanks, dehy units and other associated equipment required for each lateral would make it virtually impossible to site as many laterals on a single pad as you speculated... but I like your enthusiasm!

Permalink Reply by Jim Litwinowicz on July 22, 2012 at 2:36am

If we ever get to the point that we are drilling five or more horizons off of one pad, they could drill five laterals and then frac them all at once. Then they could cap those wells while the next set are drilled.  Then add the surface equipment later to service the wells.

Or they could drill five, wait a few years until they substantially deplete, set the surface equipment off to one side while the next five are drilled.

I'm sure they will figure out a way to get it done with minimal surface disturbance, minimal cost, and maximum profit.

Permalink Reply by Utica Shale on July 23, 2012 at 9:06am

Dave,

 I know of one pad in Ohio that has both a Marcellus and a Utica lateral. I do not know of any other pad that has laterals from both formations since CHPK drilled those laterals in Carroll County.

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 21, 2012 at 4:18pm

Take some deep breaths SGJ.  What you have quoted in terms of liquids prices are already ancient history.  Last posted numbers I saw were 43% of WTI, and those were for Conway and Mt. Belview... not Ohio liquids prices...and they're dropping like prison pants. 

You can insult me all you desire, I really don't fret somebody who doesn't have a clue what they are talking about.  LOL... you are already way below the $60/bbl that you first based your projections on. 

ITG Research Investment... no, they're not included... they're a joke in the industry.  Nobody in the financial arena would give a rats patootie what that organization reports. 

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 21, 2012 at 4:29pm

and no, SGJ, as I stated previously only idiots would make 30 year projections based upon rates and decline curves that have no more historical objectivity than what the existing Utica Shale wells have provided.  That would be similar to trying to state what the lifespan of a newly discovered species that you have only had one or two years to study.  You simply don't have adequate information upon which to base a scientific opinion.  But, don't let facts stand in your way of voicing your unsubstantiated opinions.  After all, nobody can really say you're full of crap.... YET. 

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 22, 2012 at 3:56am

SGJ,


Mighty strong talk for a guy who uses initials instead of his real name (as I have done).  And by the way, I have never worked in the employ of Marathon nor am I inclined to provide you with my contact information so that you can call and harass me. 

I have provided you with plenty of facts, you have simply chosen to ignore them.  You elected to use a composite NGL price which bears no reality to the actual liquids prices and actual components prevalent in Ohio for the purposes of educating people as to what they can expect to receive on a per acre basis for their royalty.  Being proven wrong obviously ticked you off for some reason.  Perhaps you are the one that must be correct all the time. 

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 22, 2012 at 9:37am

SGJ,

I may need some help, but don't bother sending me your resume.  The experts don't seem to share your perspective.

Analysis: Gas liquids glut may spur asset sales, cuts  HOUSTON | Tue Jul 3, 2012 12:22pm EDT

(Reuters) - U.S. oil and gas companies that have depended on natural gas liquids to lift profits may now have to rein in spending or sell some assets after the industry drilled its way into a glut of natural gas liquids.

Meanwhile, Raymond James analysts said reductions in both oil price and rig count forecasts puts pressure on realized NGL pricing and volumes. “Lower ethane prices will last for a longer period, until demand can reach equilibrium with significant supply growth. Given our depressed near-term gas outlook and recent significant reduction in forecasted West Texas Intermediate prices through 2013 (average 2013 WTI prices reflect a 22% revision vs. our prior model), we are lowering our realized weighted average NGL price estimates,” they said.

Raymond James officials said the average onshore rig count may decline 13% in 2013 due to a surplus supply of crude. As a result, they said, “WTI prices may need to fall far enough to drive the total US onshore rig count down 25% through the end of 2013. Under this scenario, we expect the ratio between NGL pricing and oil to remain depressed, as incremental new build ethylene capacity lags NGL production growth. In sum, we expect 1) ethane and propane will continue to exhibit a stronger correlation with weak natural gas prices (i.e., natural gas acts as a floor for light-end NGLs), and 2) heavier-end NGLs (i.e., n-butane, isobutane, natural gasoline) will reflect a higher correlation with weaker WTI oil prices (i.e., petrochemical and supply-demand fluctuations within refined petroleum products markets set heavy NGL prices in competition with oil-based substitutes).”

http://investments-and-acquisitions.com/over-supply-of-ngl-triggers...

Short-Term Energy Outlook

This is a regular monthly supplement to the EIA Short-Term Energy Outlook.
Contact: James Preciado (James.Preciado@eia.gov)
Full Report

Release Date: July 10, 2012

The Brent – WTI spread has been trending downward for the last two months, decreasing from $20 per barrel for the first week in April to $13 per barrel for the five days ending July 5 (Figure 3). The location spread is indicative of the marginal transportation cost of moving crude oil from Cushing, Oklahoma, the delivery point for the WTI futures contract, to refining centers on the U.S. Gulf Coast. Other transportation constraints also affect central North America, for instance between the Bakken in North Dakota and Cushing, Oklahoma. The spreads between Bakken and WTI crude oils suggest that it now costs about the same to move crude oil from North Dakota to Cushing as from Cushing to the Gulf Coast. Overall, Bakken now trades at a $25 per barrel discount to Brent.

 

Have a great day SGJie

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