help needed with royalty calculator

I've been playing with the royalty calculator and having trouble coming up with anything that seems close to what we've initially heard we should be receive once our checks start coming.

 

I'd like to base it on 3 horizontal wells producing 1,600,000 Mcf over 1/2 year for each well, at 15% royalties gross, I have 50 acres and total unit size of 400 acres. Lets use gas at the well head price of $3.35

 

Any help is appreciated.

 

 

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Permalink Reply by Billy Park Whyde on February 27, 2013 at 10:00am

Using the GOMS Calculator I doubled your 6 month total for a year  1.6 x 2 = 3,2 divided that by 365 days in a year or a daily  production = 8,767  put your 50 acres in with a 400 acre unit  15% at $3.35mmcf  ( note .87 rounded a day) for the year $19,946 half  $9,973 based on PA tax adjusted WHAT TAXES I KNOW NOT WHAT.

  If I screwed this up at least I tried.

Permalink Reply by Mary on February 27, 2013 at 10:08am

Thanks Billy....that would be for one well? So thinking we'll need to triple the $19,000 and then less the taxes/transportation costs/etc.

 

We were told so much more than that but I guess we'll see once our first check arrives.

 

 

Permalink Reply by Mary on February 27, 2013 at 12:13pm

Billy, I think one of the places I'm making a mistake is that the latest 6-month report shows the production at 1,675,000 Mcf for one well...but the calculator asks for daily production in Mmcf units. Can you help me with how the number is turned into a decimal or whatever when changing from Mcf to Mmcf for the calculator? Sure it's easy but I just can't wrap my head around it. That is for only the one well so whatever calculation we end up with I will most likely multiply by 3, correct?

Permalink Reply by Billy Park Whyde on February 27, 2013 at 2:02pm
Mary I had used the original 1.6 figure as a total of all three so roughly multiply my calculation (WHICH MIGHT BE WRONG LOL) by 3. and use the 1.6 as a average.
Permalink Reply by Billy Park Whyde on February 28, 2013 at 7:46am

$19,946 x 3 wells = $59,838 a year

  OK whose right?lol 

Permalink Reply by Tom R on February 28, 2013 at 3:58am

If you are using the production reports from the PA DEP site, they give the total production in mcf (thousand cubic feet) and the number of days of reported production. Divide the production figure by the number of days, then divide by 1,000 (or multiply by 0.001) to get mmcf (million cubic feet). Using the numbers you give in a reply, and assuming its over 183 days of production, that comes out to about 9.15 mmcf/day (actually, quite a good well). Multiply by the number of wells you want to assume, if 3 that comes to 27.45. Plugging that and the other numbers you give into a calculator I use results in an estimated monthly royalty of about $51,350.

Hope this helps.....

Permalink Reply by JREwing on February 28, 2013 at 8:52am

Tom R, I believe your calculations are correct fwiw, and yes, if Mary's production figures are correct, those 3 wells would be considered exemplary producers.

Permalink Reply by Mary on February 28, 2013 at 2:15pm

Tom...I think that I did exactly what you've explained and then punched the numbers into the royalty calculator and came out with monthly royalties of $189,372/year. So monthly, it comes out to approximately $15,700. Can you help to explain a little bit more. I used to be good in math; 35 years ago!

Permalink Reply by Tom R on February 28, 2013 at 3:08pm

I use a different calculator than the one on this site, it gives a monthly figure directly. Just ran the numbers (50 acre, 400 acre unit, 15% royalty, $3.35 price and 9.15 mmcf/day production) through the calculator this site links to. It gives $209,778.05 for the yearly royalty total, or $17,481.50 per month per well. The 9.15 was based on your 1,675,000 mcf figure, if you just use the 1,600,000 in 183 days it would be 8.743 mmcf/day and result is just over $200,000 per year. I do see there is a notation ( *tax adjusted) on the page reporting the number. Did you select PA on the first page of the calculator? It defaults to Texas, so that may be a partial explanation of the difference. My original figure of $51,350 per month was based on assuming 3 wells (27.45 mmcf/day), if you downsize to one well its about $17,117/month. Not sure how to explain the spread between our results, I've run the numbers through a couple of times to check and get the same results each time. If you want to try with a different calculator, the one I originally used is

http://geology.com/royalty/

I'll include a disclaimer on my math skills too, it's been closer to 45 years for me!

Permalink Reply by Tom R on February 28, 2013 at 3:45pm

If you want to try the calculation "long hand" and a slightly different route, here is the approach:

1,600,000 mcf / 183 days = 8,743 mcf/day

8,743 mcf/day / 400 acres (size of unit) = 21.8575 mcf/day/acre

21.8575 mcf/day/acre * $3.35/mcf (price of gas) = $73.22 /day/acre

$73.22/day/acre * 0.15 (your 15% royalty) = $10.98/day/acre

$10.98/day/acre * 50 acres = $549/day

$549/day * 30 = $16,470 (or $17,019 in a 31 day month)

The spread is the result of rounding some of the numbers, but the results are pretty self consistent.

Permalink Reply by Mary on February 28, 2013 at 6:08pm

Tom, so happy that you did it long hand and proved the calculator that I've been using wrong. I got this from the Penn State website through a redirect link

 

http://www.naturalgasforums.com/natgasSubs/widget_simple_royalty_ca...

 

I keep coming up with a monthly royalty of $15,700 per month. Such a large discrepancy, which is surprising to me.

 

Again, thanks for all of your help.

Permalink Reply by cmorris on February 28, 2013 at 6:20am

If you own 50 acres in a 400 acre unit and you have a 15% royalty in your lease, this would be the calculation:
50/400 x .15 = .01875 (your net decimal interest).  Once you derive your net decimal interest, multiply the amount of production x the gas/oil price, and that would be the amount of your revenue for the month.  Hope this helps!

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