Royalty Amounts to Expect?

Has anyone heard what are reasonable royalty amounts that a person can expect to receive in a years time when drilling & fracking are completed?

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Permalink Reply by redbank on July 9, 2011 at 9:08am

There is quite a few royalty calculators available, here's one that I've played with.

 

 

http://www.shalebiz.com/pages.php?page=6

Permalink Reply by deutchen on July 9, 2011 at 3:15pm
that's a real good tool. I like that. Thanks
Permalink Reply by Farmhouse on July 10, 2011 at 1:30am
I sure hope this calculator is wrong! Compared to the others it's way low. Can anyone confirm if this calculator or any of the calculators are accurate?
Permalink Reply by Henry Edwards on July 10, 2011 at 3:30am
The best calculator and has been confirmed by royalty owners is the penn state royalty calculator. I use it as well as many others. There are many factors of course so make sure your entries are as accurate as predictions will allow you to be.  Be conservative and you will not be disappointed
Permalink Reply by Farmhouse on July 10, 2011 at 6:48am

Ok let me ask this. If I understand correctly "Initial Production" is the result of the very first days of production. Then, naturally the decline begins. 

So why show an annual result for the Initial Production at all? All calcs that I've seen do this including Penn State's. I think it just confuses things.

For instance, plug in some numbers on Penn State and I get a "First Days production x 365 days= $150K" Then a "First YEAR Royalty of like $48 grand. So what happened to the $150?

Am I getting $150 in the first year or the $48? I'm just confused as to why all of these calculators include this IP annualized figure and then show a much lower first year number.

Or is IP x 365 considered year 1, and First Year is really the second full year?

Permalink Reply by SA Frank on July 10, 2011 at 8:48am

Keep in mind that you will probably use a unit size of 640 acres or more.  However Keep in mind that the operator will probably drill 6 or more wells on that unit.  You would get a piece of each well on the unit.  Someone on this board said as a rule of thumb you could count on between $5 and $10 per acre per day for 10 years on a decent Marcellus well. 

 

Permalink Reply by Henry Edwards on July 11, 2011 at 12:55am
Its actually between the two would be first year royalties. After the first year its more accurate due to the steep decline. The fact is that is for one well. If you are in a unit there will be more wells. You just want them to drill
Permalink Reply by Finnbear on July 10, 2011 at 3:33am
Only time will tell that. Your royalty check all depends on how much the drilled formation produces, how fast the formation depletes, how many days per week, month, year the O&G produces the well, what % royalty your lease pays, whether it is a gross royalty or are production costs deducted, etc., etc. Every well is different. The next closest well to yours may well have completely different production characteristics from yours. You have no way to know what will come out of that hole until it does and it gets sold. On the 108 acre farm where my home is, there are two wells that were drilled plus one just across the street from our house. The one behind my barn was a fairly good one. The one just to the east was marginal. The one across the street was a dud and it is the closest to the good one behind my barn.
Permalink Reply by mark ayers on July 10, 2011 at 4:49am
In your opinion is the differences in the two wells in the formation or the completion?
Permalink Reply by Finnbear on July 10, 2011 at 8:00am
The formation. About ten wells were drilled as a package in my neighborhood. All by the same crew with the same rig in the same time frame. None of those wells are closely matched to each other.
Permalink Reply by mark ayers on July 10, 2011 at 12:21pm
This would be an interesting case study in how is formation works, has the company spoken to you about this?
Permalink Reply by Finnbear on July 11, 2011 at 2:15am
These wells were drilled before I bought this place. I lived in the neighborhood at the time but not on this farm.

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