ROYALTY EXPECTATIONS

It seems to be hard to come up with a confident estimate of the royalty payments I might receive if drilling ever takes place.I own about 50 acres in  northern Washington co. and was wondering if anyone currently receiving payments in southwestern Pa. may help  with any information as per acre payments their receiving.

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Permalink Reply by Carol M. on July 25, 2011 at 4:50pm

Mark,

I am receiving payments in Washington County and a couple of other locations.  I own properties in 14 different locations in Western Pa.  I also own property in Union Township, Washington County that will soon will be producing.

You are correct on how difficult it is to come up with a good estimate.  There are at least 8 variables that will impact the royalty payment amount that could cause one to receive anywhere from zero dollars to $100k per month, for example on a 100 acre property.  There are calculators out there, but you need to understand all the variables to use the calculators correctly.

If you need help give me a call.

 

PS  If you are located in the north west corner of Washington, congrats since that is a great location.

Permalink Reply by FXEF on August 2, 2011 at 6:43am

mark,

There are several variables you will need to know before you can estimate royalty payments.  Here is how to calculate what your gas income will be from month to month.

your acres - Acres you have leased in unit.

unit acres - The size of the unit.

% royalty - Royalty as listed in your lease.

your acres / unit acres X % royalty = your decimal interest

your decimal interest X total Mfc gas produced in one month = your share of produced gas

you share of produced gas X spot market gas price per Mfc = $$$ you will receive for that month

Remember this will only give you an estimate because of fluctuation in gas prices and deductions are not calculated. Also remember that as with all tight shale plays there is a 75% to 85% decline rate the first year , then it will gradually flatten out.

Permalink Reply by Josh on August 2, 2011 at 7:55am
Is there an average per acre estimate?  I have heard anywhere from $100 an acre a month up to $3000 an acre a month, just would like to have an idea.  I know where in the triple play Utica so there would be more factors on what resources your producing.
Permalink Reply by FXEF on August 2, 2011 at 8:46am

Josh,

Probably the $100 an acre per month would be more realistic. To receive $3000 an acre per month at 20% royalty, in a 640 acre unit, at $4.00 per MCF, the well would have to produce 2,400,000 MCF of gas per month... and that is not going to happen. Look at what the wells are producing in your area, that can give you an idea of what you can expect.

Permalink Reply by craig on August 2, 2011 at 9:50am

FXEF,

You are failing to include the added profits from the condensates in the wet gas. I read somewhere that the condensates in our area can add upwards of 100% to the value of the gas.

They were claiming an added $3-$5 per MCF of gas sold. Not sure of the truthfulness of the numbers but it does add a fair amount of value i believe.

 

Permalink Reply by FXEF on August 2, 2011 at 10:19am

Craig,

You are correct, I did not include condensates in the calculation because most Marcellus gas is dry gas. If you are in a wet gas area, then royalty would be somewhat more, depending on the bbls of condensates produced each month, but most likely would not reach $3000 per acre.

 

Now, the Utica oil play is a completely different set of calculations, that could possibly reach the $3000 per acre figure... I don't know.

Permalink Reply by John Hippely on August 2, 2011 at 11:04am

yes the utica is what CHK is after in eastern ohio. and in our area they are finding not only wet gas, but also pokets of crude which was not expected. When you put the two together an average of 1000/ acre is being estimated based on the testing chk has already done. Wells in southern Oh are already at these figures based on actual well production. Now I'm like everyone else on here, until I see a check made out to me, anything else is worthless...

Permalink Reply by Josh on August 2, 2011 at 11:06am
Thats where  i am, I can see the buell well from my property and they haven't released any numbers that I know of.  Sit back and wait to see...
Permalink Reply by John Hippely on August 2, 2011 at 11:22am

Are you in the production unit for that well Josh?

Permalink Reply by Josh on August 2, 2011 at 1:55pm
No, not that fortunate.
Permalink Reply by Jim Pollock on August 2, 2011 at 2:58pm

A guy told me that he talked to a man that owns 200 acres of the buell well and he claims that he is getting $5,500 per day off the well. If my math is right, that is $165,000 per month. that is $825.00 per acre per month.

Permalink Reply by Steven Gardner on August 4, 2011 at 1:52am

Jim,

 

According to the DNR site the Buell drilling unit is only 177.4 ac

I don't see anyone owning 200 ac of the unit.. part of his 200ac

may be in the unit..?

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