Royalty payments

 We are in two units, Both have just started (one in Jan., other in Feb) together (we have been told) we will have 11 wells. We are waiting on Division Orders. My question is do you get paid per well or per pad? 

We only have 12 acres and I was just wondering if this is going to be nice money or REALLY nice money?

People are sending us letters asking if we want to sell. It makes my husband and I wonder how much this will end up being.

Is it important to have a lawyer look over the Division Orders?

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Permalink Reply by Tico on March 26, 2013 at 10:11am
Who are you leased with and how did they drill eleven wells,that's amazing, it can't be Chesapeake.
Permalink Reply by Deci Ruiz on March 26, 2013 at 12:11pm
It's with southwest and the 11 wells will be up and running by Oct.
As for now it will be one in the first unit and one in the second unit but more coming,so far they are right on target from what they told us in august of last year.
Permalink Reply by Tico on March 26, 2013 at 12:43pm
Hopefully for you southwest is more honest with you than Chesapeake was with us, but southwest is a smaller company so maybe they will drill all the wells. I don't see how it would be possible tho for them to have 9 more wells completed by October, good luck with everything,,,
Permalink Reply by Clinton44 on March 26, 2013 at 10:26am

Hi Deci,

Royalties are paid per well not per pad.

We too are in two seperate units, the one most comparable to your acreage is the one in which we have three wells producing, our acreage in this unit is 14 acres. Total unit acreage is 537 acres. In the average month we receive between $300 and $500 per well in this unit. Our royalty percentage is 15% with deductions ( gathering fees are the only deductions being taking at this point) shared proportinately with others in the unit.

So once all 11 of your wells are in production I would say you will have a NICE check coming every month..

As far as a lawyer looking over the division orders that is up to you, we did not have our lawyer review the division orders, we did our own calculations to verify that the royalty decimal interest was correct.

That calculation if my memory serves me correctly was your acreage in the unit (12) divided by total unit acreage, then that sum multiplied by your royalty interest percentage agreed upon in your lease terms, that gives the decimal interest that the gas co uses to calculate your royalty payments. They multiply the net or gross monthly production figures depending on your lease terms by that decimal interest to calculate your monthly royalties.

Also the wells are usually in production for several months until you receive the first check so the first check is usually for two months worth of production.

Permalink Reply by Deci Ruiz on March 26, 2013 at 12:17pm
Thanks we are looking forward to this. I just don't want to miss something and my kids have to deal with something I missed. I really think this is a blessing who knew when we bought (a place to camp and hunt) this 35 years later it would be part of our retirement plan. Thanks for the info
Permalink Reply by Clinton44 on March 26, 2013 at 12:33pm

You are welcome, hope all goes well for you and that the driller sticks to the schedule that they provided to you. Sounds as if you already established contact with someone within their company, that is a good thing, we did the same with our driller (Anadarko) and they have been very helpful right from the beginning.

One thing I forgot to add regarding the offers you received, I am assuming they were looking to purchase all or portions of your royalties. We received those letters as well most of them were accompanied by very large and enticing checks for just half of our future royalties we told them thanks for the offer but NO THANKS!! Unless you need the $$ right away I would advise against selling especially considering the fact that you already know you are in the units. Even if the units develope slower than anticipated they will eventually develope to their full potential.  

Permalink Reply by Todd on March 26, 2013 at 3:44pm

Hi Clinton,

What county are your wells located in and how long have they been producing?  Oh, I see... you're in Clinton County, PA.  What formation was drilled?  Are they taking out post production costs?

Hi Deci,

Absolutely, have an experienced Oil and Gas attorney look over the Division Order prior to you signing it.

My acreage has been pooled into a unit but we are waiting on a pipeline in WV.

Thanks,

Todd

Permalink Reply by Clinton44 on March 26, 2013 at 3:57pm

Hi Todd,

The wells I refered to for Deci's questions are in Clinton and Lycoming Counties in PA and have been in production since April of 2012

Five of the wells in our other unit have been producing since November of 2011 and another well that was fraced later due to a lease holdout and unit boundry reconfiguration because of the lease holdout in that unit, that one just went to production in Jan 2013

Permalink Reply by Todd on March 26, 2013 at 4:24pm

Clinton,

That's alot of wells!  Congrats on that.

Our well is located in Hancock County, WV and we are waiting on infrastructure to arrive to begin production... will be a few years.  Chesapeake is the operator.  6 wells are planned.

We are only a couple miles west of Beaver County, PA.

For the unit in which you have 6 wells, are all 6 wells headed your direction or are 3 going north and the other 3 headed south?  I thought they usually divide one pad into 2 production units with 3 laterals drilled north and 3 laterals drilled south.

Thanks for your help,

Todd

Permalink Reply by Clinton44 on March 26, 2013 at 4:30pm

Thanks Todd,

you are correct the unit with the six wells 3 run to the south the other 3 to the north. We got lucky with this unit it is 698 acres and it was not split.

The other unit with the 3 wells is a split unit with each unit having a little over 500 acres in each unit.

Permalink Reply by ShaleAdvice (Steven C. Townsend) on March 27, 2013 at 2:15am

Deci

If you decide to, and I hope you don't, please let me know.  I can put you in touch with our expert who can provide a valuation of your mineral estate.  It is important that you do not cut yourself short.  We have seen too many landowners sell their rights well below their value.  This situation comes up more frequently during divorce and estate issues, but it seems to be the trend moving forward to prey on landowners who have little or no knowledge of the actual value.  Moreover, if you are already receiving royalties the division orders are also important to analyze, but the only way to determine the accuracy of the payments is by an audit. 

Permalink Reply by Deci Ruiz on March 29, 2013 at 2:22pm
We are not Interested in sell anything.

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