After some initial assistance from Skip Peel in learning about how royalty calculations work, I whipped up this spreadsheet to estimate the royalty payments from a well.

Start by filling in some values on the first sheet:
Acreage owned in unit- very few people are lucky enough to own all the acres in a drilling unit. You'll have some subset of the full acreage. For instance, we own 36 acres in a 640 acre unit.
Total Acreage in Unit - this is how many acres make up your drilling unit. 640 is a common number.
Royalty Fraction - expressed as a decimal. If you have a 3/16th agreement, then the number here (.1875) is correct
Deductions - expressed as a decimal. Here, 10% (.10) is deducted for transportation costs.
Your share - perhaps you own the acreage with several people. Put the number of people who get a percentage here. The shares are considered equal; if they are not then enter '1' in cell E2 and perform a percentage calculation on your own.


The spreadsheet has flaws, certainly - it only calculates monthly totals based on an average price of gas in a particular month, which you must figure out yourself (this seems to be a good place for that). Also, I have a value on the first sheet (fill in your values) that allows me to split the royalties evenly between several people. This might not fit your situation. If you are the only owner of land in a drilling unit, just set that number to 1.

Otherwise, it does a good estimation of royalties for the Gas produced I think. I have included enough columns for 6 separate wells. If you have more, you can either copy the "estimations" sheet's cells and copy in a new sheet or whatever other method makes you happy.

The last columns add up all the values in a row (a row corresponds to a month). One column is the gross amount, the other is the net after the deductions percentage estimation is applied (for instance, 10% for transportation costs).

All along the top is a running total of how much individuals, the group, and the individual after 30% income tax is taken out.

All these numbers are ESTIMATES - don't use them to plan your retirement on, but they are a good way to see how a wellhead that made $1.5 million in a month gets you $2500 (or whatever based on your numbers).

I would love if a real Excel freak made something like this that sucked less. But I think that novices (like me) could find this useful in getting some estimates out of SONRIS' monthly well production reports.

Anyone who wants to post a better, or modified version of this, please feel free.

Also, you can see it in Google Docs here:
http://spreadsheets.google.com/ccc?key=0Ag4sFAekraKEdFhtS2FYbVEtaEx...

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Thanks. I was curious bc on our land it is easier to get to some spots over other due to terrain, timber, water, etc. Also, based on where one house is in compilation to a drilling clause it would be hard to drill from one spot in particular. I believe there are using the superpad concept which I would assume saves them some money. Thanks for the response.
It depends on the shape of the development block and a few other factors. It is helpful to think in terms of groups of sections instead of individual sections. Keep in mind that this is about manufacturing efficiency. If there is a row of sections east-west and they are two sections deep north to south, the obvious development design would be a single road with gathering system running down the middle east - west with super pads serving each pair of adjoining north - south sections. The wells for the northern sections would be drilled from the south side of the superpad located in the southern sections. And visa versa. Not all development blocks are in this shape and not all HA wells are drilled north-south although the vast majority are. All the major shale players attempt to get as many contiguous sections in as compact or linear a shape as possible and then formulate the design of the infrastructure that will serve the maximum wells for the minimum cost. Whenever you see aerial photographs of multiple wells, notice the repeating patterns. The shale is indeed more akin to manufacturing, and setting up an assembly line, than it is to conventional exploration and production.
This may be a dumb question, but is this the main reason certain fields/sections/units are thick with rigs and others hardly have any? In other words, is it mostly just a matter of time--while the roads and pipelines are built--before permits are pulled for these well-less areas? Is it also that seismic testing may indicate less potential in those areas? Thanks.
George, one other thing - when they talk about X% declines - for whatever period - they are referring to subtracting X% from the previous level at each stage, not subtracting X% of the original level. So a 7% monthly decline would not mean running to zero in 14 months, you would be down to around 39% of the starting level.

100 - 7 = 93
93 - (7% iof 93) = 86.49
86.49 - (7% iof 86.49) = 80.4357
etc. etc.

Even if the decline stays at 7% that represents a diminishing number - e.g. 7% from 20 will lead to 18.6 at the next time period. So the decline tails out, potentially running for a long time.
Well put, ledlights.
Nice. Thanks, Caliente.
Gayle. No operator wishes to run a pipeline across miles of land to serve a single well. And each extension to the gathering system that can serve multiple wells is an efficient means to invest development capital. An operator can shut in a well drilled to beat a lease expiration date that lacks a pipeline but they incur costs and create no cash flow. Many of the HS operators are in financial positions where they depend heavily on cash flow. They have to drill to hold the leases but they have to sell the gas to afford to keep drilling.
So one could expect to see the Logansport, Grand Cane, and other sparse fields sprouting rigs in a gradual sort of wave? I haven't followed the spread of the exploration wells long enough to understand the pattern, but that's what seems logical and is what I'm understanding from these posts. Thanks for the feedback.
Try this link and play with the map a little.

http://sonris-www.dnr.state.la.us/gis/haynesville/viewer.htm

You may have to cut and paste the entire address or enter it in your browser.
Yes, thanks. I found that great map a while back. Tried it again just now, though, with the bottom holes and bores and got a better picture. So the Logansport field area looks as though it has wells all around our section--S16 11N 15W, where the McCoy permit was allowed to expire. But the Grand Cane field north of Stanley is still fairly undeveloped. I never know if I'm interpreting things correctly, but that's how it looks to me.
Skip,
This link should work without copy/paste.
http://sonris-www.dnr.state.la.us/gis/haynesville/viewer.htm

Now, my question. Some of the wells are in non-unitized sections. I thought that a unit had to be formed before a well was permitted in that section. Please clear the mud from my head.

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