royalties dropping when will it stop

we are wondering why our royalties continue to drop we have been receiving them for 3 years we were told after the first year it would level off and the second year would be half of what the 1st year but that has not been the case it is now about a third and it is continuing to drop at least 100$ every month some times more is it possible that they are not letting it produce or  is it really not producing just wondering if anyone else is dropping  we are in noble county

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Permalink Reply by Bullfrex on July 31, 2018 at 12:35am

Are these Utica or Marcellus wells?

The dreaded decline curve is to blame. Every well is different, and predictions are just that....guesses really as to what will happen over the productive life of the well. Some wells show HUGE declines of 60-70% in the first year, while others much less....by year 4 or 5, the well might be producing 20% or less of the original IP, and that might remain relatively flat for the remainder of production....a flatter decline curve from the first few years.

The price also figures in the equations, along with the practice of throttling (or choking) the well to meet pipeline obligations or manage the NG price environment. A better way to track decline is to track the actual production (in Mcf) over the years, as that will give you a more realistic decline than using royalty $$.

There is the possibility of new wells drilled there if the producer viewed the well(s) as profitable. There is also a chance they will drill to a different formation, but that could be years away.

Gas royalties are a windfall, but with a finite lifespan....hopefully the $$ have improved your life situation and you have maybe stashed some away for the later years when the numbers decline.

Permalink Reply by G.H. on July 31, 2018 at 2:54am

I have heard that these companies, if they want to, can go back and refrack a lot of these wells and obtain production numbers close to the original production.  I am yet to see that reflected in my royalties as far as I know, but I hope to see it someday.  Anyone else heard that?

Permalink Reply by Robert Matthews on July 31, 2018 at 3:21am

     I never thought our wells would drop off so much in Jefferson County, ross twp utica formation.

1st quarter 1017- 250180

2nd quarter 2017-309960

3rd quarter 2017-222140

4th quarter-2017-53522

1st quarter 2018-28891

     I know wells decline in pressure, but this seems like a lot. something just doesn't seem right.  

Permalink Reply by Bullfrex on July 31, 2018 at 4:25am

Robert,

It seems like there is more to your production drop off than a typical decline curve would suggest. A ~90% decline in a year is astronomically high, and in following Utica wells in North Central PA, I have not seen one drop off like that.

Have some/all of the wells been shut in? Are they drilling new wells on the same pad? Many new wells in the immediate area coming on line? Pipeline restrictions? Are the wells producing for the full month?

I find it more useful to track the daily production average numbers when considering decline (total produced for the month / number of days produced that month), so if a well is offline for 10 days in a month, you don't consider the monthly total only, skewing the results.

Seems like throttling could be a cause, but to choke a well this much jeopardizes total lifetime production, and I have read the well may not live up to full expectations when throttled this severely.

All of this is pure speculation on my part. If you know anyone else in the area in a different production unit, see if they might share their well output numbers with you, to see if yours is an anomaly, or are all the wells in this rock depleting as quickly.

Permalink Reply by Bullfrex on August 1, 2018 at 2:22am

Robert,

In your post, you stated 'wells'.....how many wells' production are included in your numbers?

Are they in the same production unit?

And to confirm, these are Utica wells?

Lastly, do you know the lateral lengths of the wells?

I have been gathering data on Utica well declines, and I would appreciate adding yours to my spreadsheet. Thanks!

Permalink Reply by Robert Matthews on August 1, 2018 at 4:05am

     Hello Bullfrex,  Those numbers are for just 1 well . the 6-h  it is in the point pleasant formation and if I am reading the info right it is 95.71 acres- 3711 ft.   API# 3408120515  my unit also includes the 1-h which is 148.61 acres-5950 ft.that one is in the utica, the decline is similar on that well also..

Permalink Reply by Robert Matthews on July 31, 2018 at 5:37am

Thanks for the reply Old Timer.  the only thing i can think of is that these wells were one of the first wells that were drilled in that area.  The wells were drilled in 2012 I think. maybe that has something to do with it? it is the Ascuncion west unit.  I am in the 1-h and 6-h.

     I checked some of the other wells in the area and they seem to be doing good, even the ones that have been producing for a while... but it seems they have been drilled more recently..

Permalink Reply by G.H. on August 2, 2018 at 3:51am

Thanks for the info, Old Timer.  I'm not gonna pretend I understand 100% of what you're saying, but I get a lot of it haha.  Sounds like you have a lot of knowledge of drilling methods.

Permalink Reply by william george allison on August 5, 2018 at 10:55am

you would think that when an oil and gas company returns to an existing well pad with wells that have dropped off signifantly they would refrack while drilling new laterals on the same pad right old timer?

Permalink Reply by Brent Morehead on September 5, 2018 at 3:02pm
The information provided by Bullfrex and Old Timer is excellent. Also, In order to know your royalties due, then you need to know production and how it is being sold. If the operator does not own the pipeline, then it may have a cap on delivery quantities. Or a variable price contract. Sales contracts with pipelines make a normal lease look like fun reading. If ever possible, try for an audit clause in your lease. If too late, try to use the Freedom of Information Act to acquire your entire well file----as drilled plat (what the unit ended up looking like), completion report for well (should show exactly what happened during drilling), and depending where you are production should be available quarterly. I do not know what Ohio requires now, but worth a look. Companies drill under permit, which is a government document, and thus available to citizens. Other filings are required pursuant to this process, and if the government has it, you (Joe and Jane Citizen) have a right to it. Personally, my thoughts are that every landowner should get a copy of every filing that relates to their land. Since that does not happen, ask. Use API and name of lateral.
Permalink Reply by shakeshale on July 31, 2018 at 7:10am
It never stops
I have seen 75% to 80% declination over 5 yr period to the point 92 unitized acres in 4 sepetate units at 15.50% bring in about $ 1400.00 per month or approx $15.21 per acre from a well that produced over 1 BCF in its first 3 months of production. My question is what are they going to do with these depleted wells ? Come in and restimulate ?
Drill deeper or shallow off same pad ? Or just move onto undeveloped acerage and drill that. Infill drilling with verticals like the Barnett. No answers so far
Permalink Reply by David Allen Lilly on August 1, 2018 at 1:02am

As far as re-fracking goes I believe the companies are far more concerned with holding acreage by production than re-fracking. 

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