Royalties Plummeting at a More Rapid Rate - EQT Improvement under Rice Mgt?

Hello. It's been a while since I've been on here but I have a question for everyone I'm really curious about. Has anyone else noticed a sudden increase in plummeting royalty payments and market prices? I'm obviously not oblivious to the fact that the market has been steadily dropping for a variety of reasons and a lot of gas companies are dialing back production due to falling prices BUT the most recent market price seems to be twice the drop - at least  in my area. We are with EQT; former Rice Energy landowners, and bought stock and fought to vote the Rice team back into management positions at EQT after abysmal performance and poor relations over the course of EQT ownership of former Rice leaseholds. We had - and still have - confidence in the Rice contingent to turn things around for EQT but are currently questioning if it will be advantageous for their existing landowners and producing units. This months' ridiculously low sales accompanied by apparent lack of interest in advancing existing producing units have brought questions to mind. We attended the EQT Land Owner meetings with Toby Rice and a lot of emphasis was placed on returning to existing pads and drilling additional laterals, thereby saving prep costs, increasing production, and lowering drilling costs. They cannot - of course - affect falling market prices, however we haven't seen any attention being paid to existing units, which seem to be being let to slowly (and lately NOT so slowly) fizzle out. Wondering if this is something others are noticing. It would seem to me - logically - that the most financially profitable would be to get the most out of existing units, thereby reducing drilling costs, during this slump in market prices, rather than going to the expense of developing new units and starting from scratch. Just not understanding what is currently happening and wondering if anyone out there has any insight or ideas. Our unit is only 3 yrs old and has had an accumulative 30% drop in royalties over the past 12 mos and a full 30% drop between just last month and this month, which was a complete shock. Curious what others are thinking, though I'm sure it's nothing good.

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Permalink Reply by GotGas on December 30, 2019 at 10:57am

OMG! I am very sorry to hear that. I just can't believe that EQT is only selling your gas for $1.24. The lowest price pinned on the NG1 Futures graph is $2.02. Same price as with Henry Hub. You guys should at least be getting Henry Hub Prices. Where does your gas go? What Hub? 

https://www.cnbc.com/quotes/?symbol=@NG.1

We were $2.28 for Sept 

Oct $2.11

Nov $2.07

Dec $2.09

We do not pay any deductions other than state tax from the gross.....so when we are paid $2.11 the taxes are taken from that. 

Permalink Reply by GotGas on December 30, 2019 at 11:20am

Checking at Marcellusshale.org...Green Co has a Crowd Source value of $1.69 but I am not sure that is accurate.

I am not an expert in any regard

Permalink Reply by Lori Huber on December 30, 2019 at 11:25am

I am located in Washington County, PA. It is the Dominion South hub, I believe. Ours sold at $1.34 for Dec (Oct production). Last month,  Nov (Sep production) was sold at just $1.58 and $1.82 in Oct. (for Aug production). It definitely seems like something is wrong.. It hasn't been a gradual drop. It just plummeted suddenly. I agree with Jeff in questioning how they're coming up with our sale price.

Permalink Reply by GotGas on December 30, 2019 at 12:28pm
Neacng_30122019_86db932a-ac63-4ae6-b85f-b8eb1a2f1253
It is hard to read but it looks like Oct Production/Price for Dec royalty was a little under $2.00 and as high as maybe $2.35 or so.
See Henry attache..looks to be about $2.20 low and over $2.50 high for oct
Permalink Reply by Jeff Kerr on December 30, 2019 at 2:49pm

not sure where my gas goes I am not very good on this pc stuff. They take aprox 30 % in deductions but the price has been under 2.00 per unit for many months. I pay my taxes at the end of the yr on my royalties I thought atw pricing was lower than the H-H price it been this way from day one Chesp Rice AND eqt have been  owners of my unit. Sad thing is I don't own many acres so the cost to pursue legal action would not be worth the cost   

Permalink Reply by Lori Huber on December 30, 2019 at 3:49pm
We have a no deductions lease for ANY reason and pay our own taxes, as well, since the % they want to withhold is a lot higher than what we pay with our tax ded, etc. Big question I've been hearing is what determines where the wellhead is. Is it where it comes out of the ground at the well (where it should be) or some other location designated by the driller like the compressor station? How can they know what and how much gas is coming from what well? Following crowd sources gas prices, they are paying different prices from different wells within fairly close proximity. How can one sell higher than another 5 or 6 miles away? And how can they tell whose gas went to what buyer, particularly if it all goes into the same pipeline and compressor station for distribution? There are a LOT of questions re: sales price and royalties. We have a little over 68 acres leased. Still not enough to justify legal expense for an audit, especially athletic current prices. Best course I can see would be for a large group of a company's landowners to join together to request an audit and split the cost if enough feel that its justified. Not getting questions answered repeatedly is just cause and the inconsistency with the hub prices is another. I opened this discussion because something seemed off and the more info brought out, the more it seems so.
Permalink Reply by frank speaker on December 30, 2019 at 4:32pm

The wells are metered at the wellhead. Before you think about hiring an auditor you should have an attorney examine the lease. Sales need not be made at hubs, and you were told your gas was pre-sold, so did they have a right to do that? Perhaps there was some self-dealing involved. Sometimes the operator sells the product to the O&G company, then it is re-sold. If you do get an auditor, what will the auditor examine? The less work an auditor does, the more profitable for them. You could get screwed over a second time and have to audit the auditor. Whatever you do, do not sign a non-disclosure clause unless your audit clause demands it. Anything nefarious needs to be exposed.

Permalink Reply by shakeshale on December 30, 2019 at 6:28am
Buying opportunity ?
No thank you
Take a long hard look At Chesapeake
It says it all as they will be delisted on the NYSE
Becoming a penny stock at 0.84
Aubrey has a legacy his shortsighted greed and extravagant spending plus the boat load after boatload of debt sank the mighty Chesapeake
Permalink Reply by frank speaker on December 30, 2019 at 11:33am

Mighty Chesapeake was never anything but a shell in a shell game.

Permalink Reply by Roger May on December 31, 2019 at 1:24am

I cringe as I read about landowners struggling with declining royalties, low prices and suspicions of large producers like EQT, Rice, Chevron, etc.  As a minerals "broker" I have seen prices paid for or offered for mineral rights decrease at least 50% in just the last year. I have seen owners get pinched out of any future development by random unit design and permit holding (the practice used to hold leases without really producing and the paying of delay rentals in lieu of production payments).   The risks of "just holding" often outweigh the consideration of selling mineral rights. 10-12 years ago , before the widespread use of fracture stimulation to get the tight shales to produce,  these coveted mineral rights were worth next to nothing.  History does repeat itself for a plethora of  reasons and the obvious boom/bust cycle of energy pricing and industry ups, downs and outs leads me to believe that the worst is yet to come.  Those that are lucky enough (and I emphasize lucky here) to have been included in a drilling unit and have received their share (fair or not) of production revenues should thank their lucky stars.  I am a firm believer in the "bird in the hand" philosophy and can give 10 reasons to sell for every 1 reason not to.  Its not a measure of value or price, nor present discounted value of future cash flows.  Rather I think the decision to sell is more a matter of risk transference from mineral owners to pooled funds (the buyers).

Best of luck to all of you.  I hope that prices go up, drilling activity increases, old wells get refracked, and old pads get new permits.  The fact is that low prices dictate that no matter what the price, activity or  the inclinations of the big developers are, they cant and wont continue to thrive until the time they can sell their product above the cost of producing it. Its a painful process at all levels.  But one that this cycle needs to complete before things look up. 

Permalink Reply by Lori Huber on December 31, 2019 at 3:47am

Thanks, Roger. You definitely rounded everything up in a nutshell, though there are always individual circumstances that don't always fit hand in glove. I worked in the financial housing industry (combo of both) back when the banks and real estate bubbles burst simultaneously and can't help but see a lot of comparisons in this industry. Unfortunately, there's no one solution to every situation. As in the banks/housing bust, some individuals  benefited by just hanging on if they could - even though they were completely under water due to falling market prices and banks going down - and 10 yrs later, the housing mkt did a complete turnaround. Those who held on were rewarded; those who couldn't lost their shirts. Same seems to be the same here but unfortunately, a lot of individuals relied on projections and promises that didn't hold up and in such a young industry, have very little insurance or legal recourse behind them, as some had in the housing market. I, myself, am pro-hold on and the market WILL eventually turn around. There's too much need for affordable energy worldwide for it not to, despite Green and alternative energy battles holding it back right now. Bottom line is that the battle is between a Sherman tank and a pea shooter. Green Energy can't supply the world... period, and natural gas is the cleanest, most environmentally friendly fossil fuel in existence. It WILL turn around, though when is anyone's guess. So individual situations and who can hold out become the stories. My concern when I started the discussion was the SUDDEN drastic decline without real cause other than the gradual decrease in market sales we've been seeing all along. A LOT of questions re: how the drilling companies are treating the royalty owners in the manner that they calculate and pay royalties, and although the bottom line is always prime concern to the companies, we own a portion of that bottom line and have contracts on what we are entitled to. If companies are cheating the landowners who own the minerals - leased or not - then they need to be exposed. The market will do as it does but in the meanwhile, landowners need to know what's going on and make sure they aren't being abused by the big companies. Just a little bit of transparency would go a long way.

Permalink Reply by GotGas on December 31, 2019 at 4:01am

You could try contacting the State Attorney General. Tell them what you think may be happening. 

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