How are royalties figured...

I have heard from people in areas that are getting royalties already that some are getting $300-400 or more per acre for royalties. I know the leases my family has says we get a % of royalties...so I'm trying to figure out how this works out.

Let's say your royalties are 18% net. Do you get 18% off the $300-400 per acre people are getting or is the per acre amount already calculated with the %? I'm just trying to get a better understanding on how this all works.

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Permalink Reply by Andrew on November 20, 2013 at 5:05am

For anyone who is interested in a simple way to estimate their potential royalty, I use an iPhone/iPad app called RoyaltyTrak.

2z248p19vqnh9Permalink Reply by 2z248p19vqnh9 on November 20, 2013 at 10:36am

So true, Alida, BUT one must remain wakeful, watchful, and WISE...therein is TRUE 'JOY' maintained. Remember the parable of the talents...

As one light lights another, nor grows less - so nobleness enkindles nobleness. - "It is not the abstinence from pleasures that is best, but mastery over them without being thwarted." - A.

*American...A-men:I-CAN! (just change the 'r' to 'n'...because I CAN! *Amen!)

Permalink Reply by Bill F. on November 20, 2013 at 4:47am

 $ 300 - 400 an acre is far off the real figure of $ 70 - $ 100 an acre .Also this amount can go as low as $38.50 ( Paid for Sept 2013 ) an acre depending on the NG price (average for the month ),Most people don't know that there are different NG markets throughout the country and the NG  can go to different markets (which pay different prices daily.The NYMEX does not reflect the price you may get from your drilling company and transmission charges ( by pipelines ) can and do apply .I the long run there will be quite a difference in what you may think your royalties will be.

2z248p19vqnh9Permalink Reply by 2z248p19vqnh9 on November 20, 2013 at 10:28am

NO, Marcus - you deceive yourself by beLIEf in 'bitcoins'...it is just another scheist & heist...nothing more than mere air...electronic air.

WHAT are you going to do when things 'in the REAL WORLD' get interesting? There's still Russia (they aren't our 'pals' by any means....), China (bordering Russia...), the Middle East (loose cannons...) - and in BITcoins do you put your trust, Marcus?

POOF! Puff goes the dragon...little Marcus Grayson - he did beLIEve...DO YOU?

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I know the idea I posed goes against everything that 'the establishment' wants for you to 'see/beLIEve'...and THAT is exactly why it should work - it simply makes sense. SENSE - good old COMMON SENSE, Marcus - remember when you were young?...

You are playing a 'hand shell game' with your father - you TRUST your father, right? You have a 'choice' in hands - the one holds a $10 bill crumpled up...the other a GOLD COIN...AND then there is a third choice - IF you choose it (and believe in it's promise...). IF you 'believe/trust' your father's word that you have a 'online $ account' with him that is good for whenever you want to tap it...in fact - IF you opt for this, you will even gain interest + with this choice of money re-imbursement.... You weigh your options & choose the 'E-monetary account'.

------------------

All is going WELL - things are going GREAT for you. You're 'winning'! Yippee!! You're RICH! (in 'internet currency')...THEN the unexpected happens - everything is LOST - POOF!!!

Your dad's account that he was teaching YOU with concerning 'managing ELECTRONIC CURRENCY' goes - into the ether...la-la land. It's just NOT THERE. WHOOPS.

You ask your dad if you can get 'your money' in paper or GOLD/SILVER so that you know where you stand. Bad News, kid - no go. No can do...it was all 'electronic' - sorry, junior. Don't feel too bad, dad's up the creek, too.

Yeah, people forget all too quick...▶ The War of the World — Episode 1 - YouTube..time keeps on tickin'...into the future. 

As one light lights another, nor grows less - so nobleness enkindles nobleness.

--------------------------------------

Hey, Marcus, know WHY the 'banks' love the idea of 'bitcoins' - because it is just a continuation of the WAY THINGS REALLY ARE - right now...only 'justified' more -by a 'bit'...Replace Your Wallet with a “Coin”; It’s Safer Than a Credit Card, S...

Say, that's Square, ain't it?...tic tock goes the clock...and all these things shall...?

Permalink Reply by Ed Strawn on November 23, 2013 at 4:34am

Royalties are generally referring to production at the well head.  But  the final product goes through pipelines and several processes before it is useable.  This makes it more valuable. Today energy companies want you to pay your share of the costs of making these products marketable, and in return you get a higher price for your production.

But this also puts you in a vulnerable position, because you have no way of verifying the amount of production costs that were deducted from your royalty, and if these deductions were justifiable. This is why many oil and gas attorneys are asking for post production cuts to be eliminated.  Many energy companies feel justified in asking for these cost deductions, since Chesapeake almost went bankrupt. The biggest problem for them was doing too many leases and not having pipelines, and other infrastructure in place to move the product in order to sell it.  They were running out of money fast. 

Now with more infrastructure in place, we need to nudge energy companies to get back to no post production cuts, since they can't be verified.  In some cases energy companies are deducting so much from royalties that citizens may need to march upon the state capitol to get legislation passed. Prevention of fraud is everyones business to stop.

Permalink Reply by george m. on November 25, 2013 at 6:36am

Ed,

I agree with your historical perspective on deductions. Also CHK mismanaged their Balance Sheet, (ie too much debt that didn't match their drilling/production) program.  Really good cos like EOG, PXD and a few others don't get into  a cash crunch in the first place.  That's why I worry about HK.  Let's put it this way, Would you rather have a lease with HK or BP?

I also agree that landowners have NO negotiating power.  Leases are becoming like "Software License Agreements".  You know what happens when you don't click I ACCEPT. 

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