What would you do ?

If you were offered a 20% royalty  with an enhancement clause or a 16 % with no enhancement clause and no deductions which would you accept.

Thanks

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Permalink Reply by Mark McGrail on April 5, 2014 at 8:02pm

Take the 16% (everything else being equal).

Permalink Reply by cj wyalusing on April 5, 2014 at 9:10pm

 Run away if it has to do with chk.

Permalink Reply by Jam on April 6, 2014 at 9:48am

what if its American energy partners

Permalink Reply by cj wyalusing on April 6, 2014 at 10:32am

Run even faster its mcullan and his merry band of  never pay there Roaltys Klan.  ! !

Permalink Reply by Kevin in Belmont County on April 6, 2014 at 10:01am

Honestly, it's about a wash if your in the wet gas window. I have a 20% with market enhancement, and it works out to about the same in my royalty check. But, I would say if I was in the dry gas window, I would probably lean towards the 20%. The dry gas in some places just needs water separated and then is put into sales line.

Permalink Reply by Jam on April 6, 2014 at 4:10pm

Kevin, what company are you with and are you saying their taking 4 % in deductions

Permalink Reply by Kevin in Belmont County on April 6, 2014 at 5:48pm

I am leased with Gulfport. It works out to about 20% deductions on the wet gas it just depends on what they sold and to who during the month. Deductions on the dry gas are minimal. Like I said, it would work out to probably about 16% royalty on the wet gas if you take away the deductions. If you can get a 20% royalty with no "Market Enhancement Clause" that would be the best possible deal. I have heard of some getting that, but not many. I think it depends on the amount of acreage you own and how bad they need your acreage to complete a unit.

Permalink Reply by Dan Stewart on April 6, 2014 at 6:15pm

Take the 20%,

Permalink Reply by Nancy LeNau on April 6, 2014 at 9:27pm

RUN REAL FAST.... if it were CHK. !!!!!!!!!!!!!   otherwise.... 16 %.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 6, 2014 at 11:02pm

I disagree.  The 16% without deductions is more valuable on balance.

Permalink Reply by INVICTUS on April 7, 2014 at 8:06am

Stay AWAY from market enhancement clauses. And in particular if you do not have an extremely robust and frequent audit clause in your lease. You are being asked to participate and assume risk in the marketing volatility of the product being extracted from under your feet.

If you wanted to do that, you would've bought a working interest in either the pipeline transporter, the refiner, or other such O/G partner further into/past the midstream.

You are being asked to put YOUR upfront shot at royalties AT RISK to pay for and to mitigate the risk of the producer. You paid nothing to get your royalties, in fact, you are being paid to TAKE royalties.

Why put your risk-free offer AT RISK (with the dangling of a little glitter of a POSSIBLE few more percent) for the possibility (and highly likely result) that the O/G producer will use this clause to extract now - fully - authorized methods of charging you back for expenses against your royalty?

How will you be able to trace these unfortunate new charges?

How will you be able to challenge these new charges?

If you want more riches, accept more risk and try to buy a working interest in the operation.

I'll lay money on it - If you get the market enhancement clause with that 20% being flashed before your hungry eyes, you'll get screwed -  badly.

If those were my two choices, I'd take the 16% with NO deductions, and i'd feel darn good about it, too!

Permalink Reply by Appalachian on April 7, 2014 at 8:11am

16% vote here.  Just say no.....to marketing costs.

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