Replies to This Discussion

Permalink Reply by Larry on April 3, 2012 at 6:28am

I would like to buy you a cup of coffee let me know when you would like to meet in town. I think it would be enjoyable.

Permalink Reply by Paul Martinelli on April 3, 2012 at 6:33am

Sounds great....@ $100/acre I'll take it!

Permalink Reply by Gerald Hohler on April 3, 2012 at 9:15am

I am the guy who posted this question. Your figure of approx $375/acre/month is what Chesapeake guesses at the wells out put in dollars. Just wanted an outside opinion for comparing things.

Thanks for your help.

Permalink Reply by Utica Shale on April 4, 2012 at 2:18am

Gerald,

 

 Did you see the graph of a "wide-open" well ...

http://geology.com/royalty/production-decline.shtml

 It drops like a rock!

 

 If  theorectical production starts at 5 million cubic feet per day, it then drops to only 1 million cubic feet per day within just 16 months. OUCH!!! You would receive about 1/2 of the total royalties in just the first 16 months, too. Or we can "choke" the well, just like the Mangun, and get a steady constant stream of Royalties for about 5 years at 1.5 million cubic feet per day and then in year 6 the production will START declining! Unfortunately, we as landowners, do not have that type of control over long term profits. It is CHPK that needs to satisfy their investor's need for a quick profit on their investment.

 

 The Price of Natural Gas is already low. Do we really want to "open up" these new wells and flood the Market with more Natural Gas? That will depress Nat Gas prices and Royalties even further.

 

 

Permalink Reply by PK on April 3, 2012 at 8:19am

US,

No offense intened with my comment about the math. I think your calculations are probably generally correct and if they ever drill under me I'll let you know if they are good or not.

I agree with Larry, if you make it to Carrollton let him know and I would be delighted to join you two for a chat.

Permalink Reply by Denver Gallentine on April 3, 2012 at 1:23pm

Ok, if I understand what everyone wrote (realizing there is no guarentee the amt a well will produce or even if it will produce @ all) ON AVERAGE if your land is in a pooling section that has a well you can HOPE to receive $375/acre/month once well is in production. (Affected by size of pooling and # of wells - $375 is an average).  Also, from earlier posting by Utica we should expect that amt to decrease in a small but steady slope throughout the life of the well.  I hope I got it right.

     By-the-way, if you guys are having a "coffee clutch meeting" in Carrollton I want in.  I'll buy the first round.  -  Denver

Permalink Reply by Larry on April 3, 2012 at 1:54pm

Glad to see you chime in. Always a pleasure. I hope we all roll a good die. Ill set a time soon on this post i like free coffee

Permalink Reply by Utica Shale on April 3, 2012 at 6:03pm

Denver,

 Yes, yes & yes.

 

 Mangun well ( a typical well ? ) ...

 1,500,000 cubic feet of wet gas per day

 Dry Gas at $2 per cubic foot

 20% Natural Gas Liquids

 NGL's at $10 per cubic foot

 60 barrels of oil per day

 Oil at $104 per barrel

 1 well per 216 acres

 20% Gross Royalties = $350 to $400 royalties / acre / day

 12.5% Net Royalties = $175 to $200 royalties / acre / day

 

 Adjust your royalties up/down based upon your well's specific output and current O&G prices.

 

 See this graph for hypothecial horizontal well production decline ...

http://geology.com/royalty/production-decline.shtml

 A "wide-open" well drops like a rock in just one year!

 They learned this lesson the hard way in Texas.

 A choked well has a less dramatic decline and is possibly more productive.

 Do you really want most of your royalties in 1st year and then pay huge taxes to gov't ?  

 

 I will be passing through Carrolton at 6 PM tomorrow but we have no time to stop on our way to Muskingum county. I will be back at 1AM, though.

 

Permalink Reply by Larry on April 3, 2012 at 9:49pm

Lol

Permalink Reply by Denver Gallentine on April 4, 2012 at 12:55am

Great information!  Thanks a lot.  I'm starting to understand this oil/gas game a little better.  Channel 9 (Stubenville) had an interesting report this am about a well in Harrison County doing extremely well. I agree w/ you. I'd rather have  a"choked" well that produces over a long period of time (and protects my profits from HUGE tax loss).  Signing bonus checks over the last few years have been descimated by "the taxman".

1:00 am is a little past my bed time, but we will all have to get together sometime for that coffee and good discussion.  I know I am learning a lot from everyone on this site. - Denver

Permalink Reply by Gayden Parker on April 4, 2012 at 5:26am

Don't forget the most import factor in calculating future revenue from depletion drive reservoirs: THE DECLINE CURVE.

All shale reservoirs are tight with a very limited drainage radius. 80-85% first year declines are common in the Haynesville, Barnett and Fayetteville Shales. Eagleford is somewhere in the 60-70% first year range.

If you conservatively (optomistically) estimate a 50% decline for the Utica, the well that produces 3 MMCF/D the first month will be down to 1.5 MMCF/D in 12 months. The gas to  liquids ratio will stay consistent but will decline proportionately. This is assuming that the choke size stays consistent.

That $300-$400 royalty per acre will likewise be down to $150-$200 12 months later.

You can also expect a 30-35% decline for the second and third years before levelling out to  15-20% thereafter.

That's just the nature of a depletion drive reservoir.

What determines the size of the choke is the operator's need to reach payout. If a well won't pay out in a year using a resonable size choke (16/64 or smaller), the well probably own't make money. If it doesn't make money, the next well won't get drilled until prices increase.

 

Permalink Reply by Larry on April 4, 2012 at 5:33am

Thanks very informative.

• ‹ Previous
• 1
• 2
• 3
• 4
• Next ›
• Page