Royalty amounts

So I know this has been beat to death, and I'm aware of the variables involved, and also the resulting variations in royalties...........BUT......... A person I know who is in a unit currently being drilled was told by someone with the drilling company that he could see $50,000 per MONTH in royalties.  He owns 60 acres.   Is this even possible for a Utica well??   Even if it was a great producer, and the well had several laterals, and it was a small unit, it just doesn't seem likely to me.  They told us when we signed leases that the signing bonus was "chump change" compared to royalties, but that amount just doesn't seem possible.  By that I mean I can't wrap my head around a gas well making so much $$ to where they could afford to pay one landowner that amount.   I asked again if he meant that amount is what HE could see, or what the whole UNIT would see, and he said again he was told this is what he could be getting.   Oh and the kicker?   His property was HBP by an old Atlas well, so he's at the 12.5% rate also!!

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Permalink Reply by Poor Me on January 9, 2014 at 3:20am

Todd, Im in the Alexander n/w unit,terry twp. 379 acre unit,of which I have 70 acres. Decimal interest is.03593111. Ches JVed with Anadarko,mitsui, and statoil.I get 4 checks per month. Im trying to keep up with numbers. Hope this helps. Its my nap time!!!

Permalink Reply by scott peterson on January 9, 2014 at 3:24am

How much if you wouldnt mind telling us?

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on August 30, 2014 at 3:47pm

PM & MS

     I've decided to start collecting royalty statements so I can determine which producers are stealing, what they are stealing and how they steal, and I'm not particular about state as long as it is OH, WV, or PA.

Ohio, West Virginia and Pennsylvania state governments are too busy to protect their citizens and enforce the laws. Looks like it's time to take this issue to the top.

Anyone who wants to send me a copy of their royalty statement and any complaints you may have filed I'll take them.

Theft at any level is unacceptable, and ignoring it is more than we should have to tolerate as citizens in a society full of laws we are required to follow. The laws apply to everyone regardless of wealth or position, especially a ceo.

email your royalty statements mrrxtech_yah@yahoo.com

Permalink Reply by rmc on January 8, 2014 at 1:27am
Poor me I am beeting that your in with Chesapeake and they have drilled one well .Am I right?
Permalink Reply by Todd on January 8, 2014 at 7:38am
Matthew,
What county are you located in?
Thanks for posting,
Todd
Permalink Reply by Booger on January 8, 2014 at 4:40am

EBW- the top eight ohio Q3 wells that were in production the entire quarter (87 days or more) averaged better than $25k per day......at 12.5% is $3,125 per day royalty.........divided by say 150 acre unit is $20/day/acre.....multiply by 60 acres and 31 day month and you have $37,200 per month in royalty.

the top well (stutzman 1) is double the above average........so it is possible, however probably not for very long as Perotto mentions..........although i'm not sure where these top 8 sat on the curve in Q3.

by the way, those top 8 were all in Harrison and Belmont.

Permalink Reply by Josh on January 8, 2014 at 5:07am

What I don't really understand is that these royalty buyers are willing to pay $10K+ an acre for royalties in my area.  Seems like a long time to recoup there investment?  What am I missing if the value $19K an acre over the entire life if the well?

Permalink Reply by Todd on January 8, 2014 at 7:48am
David's estimate over the life of a well seems too low to me. For a 10 Bcf DRY well at $4.50 gas = $45,000,000 over the life of one well. With 3 wells, your looking at $135,000,000.
Let's say he has 60 acres in a 400 acre unit at 12.5% royalty with 3 wells which yields a decimal interest of 1.875%.
Therefore, a reasonable expectation of $2,531,250 over 30 years can be made. (Excluding liquids; price of gas will also increase).
This conservative estimate yields a value of $42,187 per acre.
Permalink Reply by excited but worried on January 8, 2014 at 12:28pm

This well is in Western PA, Mercer County.  It may very well be another "fish story" who knows?  I plugged in some figures into the royalty calculator, and assuming his 60 acres, the minimum 640 acre unit, current $4.30 gas, at 12.5% it showed about $1,000/day assuming 20mcf production. So it doesn't really seem likely if that calculator is at all accurate.   Regardless, like most things time will tell the tale!

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 8, 2014 at 5:32pm

" For a 10 Bcf DRY well at $4.50 gas = $45,000,000 over the life of one well. With 3 wells, your looking at $135,000,000."

That's making one tremendous assumption (10BCF) and one huge accounting error ($45,000,000 over the life of the well isn't worth the same as $45,000,000 today).

Permalink Reply by Todd on January 8, 2014 at 5:42pm

I suppose it depends on where you are located.  10 Bcf is not very far fetched if you are located in a higher GIP area.  In addition, amount of recoverable gas is increasing as technology advances.  Of course, inflation is going to occur. 

I never said that $45 million over the life of the well is worth the same as $45 million today.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 9, 2014 at 5:07am

I wasn't trying to be critical, just throwing out a few other considerations.

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