average royalties / acre?

   I wanted to try and calculate what the royalties per acre would be from the average Utica well over the life of the well for a person that had a 15% royalty %. I would assume the well has about 640 acres in the unit & has 3 or 4 laterals say 8000 feet long. If it makes any difference I was going to assume the well was drilled by Gulfport in western Belmont County.

   I was going to go to the Shalecast website and use a well right beside me to do the calculations but the site is gone.

   Any guesses?

   

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Permalink Reply by Thomas Lilli on May 8, 2019 at 2:56am

I was told by one industry employee that I should expect about $300/acre/well/month. 

1 well with 10 acres in productive unit: 300 X 10 X 1 =. $3000 per month. This was about four years ago. 

7 wells with 80 acres in productive unit: 300 X 80 X 7 = $168,000 per month. 

This is is what I was told to expect. Now this could be wrong but, again, this is what I was told. 

Permalink Reply by KB on May 8, 2019 at 3:06am

Thanks Thomas.  Does anyone have anything concrete that they would be will to share.  Have a well that recently went into production in Belmont, but have yet to see any royalties.  Was curious what to expect as a normal royalty and how the current gas price might be affecting it.  I am assuming that the price of gas is assumed higher for the above numbers. 

Permalink Reply by LewPa on May 8, 2019 at 12:33pm

Thomas,

So in reality now, how much are you getting?

Permalink Reply by Thomas Lilli on May 10, 2019 at 12:29am

We’re not in a productive unit...yet. Rumor has it maybe by the end of the year but I really don’t know what to expect. The figures I shared with you were what was given to me by our company rep as an example. 

I figure I’d be fortunate if I saw 10% of what he claimed. 

Im sure, if and when they do drill and if and when the well starts producing, it will outlive me. 

Permalink Reply by Bill Bergseid on June 3, 2019 at 1:49pm

Tjhe 640 acre per spacing unit is reasonable, but not 7 wells in the 640 acres.  At least in Ohio, they usually have one well in a unit of about 640 acres.

Permalink Reply by Bill Bergseid on June 3, 2019 at 2:27pm

You also need to multiply by 80/640 since you only own 80 acres of the 640 in the unit.  You calculations also assume you own 100% of the minerals in the 80 acres.

Permalink Reply by Tusc-county-man on May 8, 2019 at 9:21am
7 wells with 80 acres in productive unit: 300 X 80 X 7 = $168,000 per month. that is incorrect math

it would be 300 x 80 = $24000 per month
Permalink Reply by Thomas Lilli on May 8, 2019 at 10:44am

You missed the 7. The formula given to me was (as I said above) $300 per acre per well per month. 

300 X 80 X 7 = 168000. 

Permalink Reply by deutchen on May 8, 2019 at 12:51pm

I don't understand where the 7 comes from? I was asking about money taken in from one drilling unit. According to what you say, $300 per acre, I would think that is $300/acre in one drilling unit. Also, what do you think the royalty % is assumed to be for the person receiving the $300/acre, 15%, 18%, or 20%?

Permalink Reply by Dott on May 9, 2019 at 12:04pm

I assume these monthly totals are before all of the deductions are taken out of the check correct?

Permalink Reply by Thomas Lilli on May 9, 2019 at 1:58pm

The formula is for 15%. The 7 is for SEVEN wells. The unit is what it is. The number of wells is dependent on the drilling plan of the company. You can have any number of wells in a unit, anywhere from 1 to seven or eight per pad. 

Permalink Reply by deutchen on May 10, 2019 at 12:07am

Here's something I found from several years ago.:

Average royalty earned = $24,000 per acre
Posted by David Perotto on April 24, 2014 at 7:25pm in General Shale Discussions
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Based on the extraction footprint data we've collected over the years, the estimated life time dollar value of the gas produced by a horizontal unconventional gas well is slightly over
$190,000.00 per extraction acre.

If the minimum royalty percentage of 12.5% is applied to this per acre dollar value, the estimated lifetime royalty payments for an extraction acre (an acre of shale from which all available gas has been extracted) is slightly less then $24,000.00

The extraction acre production and royalty estimates are based on these criteria:

- Lifetime total well production of 4 billion cu/ft
- At the wellhead (ATW) gas pricing of $3.35 per Mcf
- A horizontal drilling bore 6,000 feet in length
- one-eighth royalties based on ATW pricing values

These estimates will vary significantly if any of the assumptive values are changed. It's worth noting that our research indicates that the estimated life time well production value of an unconventional gas well varies significantly depending on the source.

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