How much better off would we be ?
With the current economic struggle that has gripped our nation and the rest of the world as well, how much better off would we be not to be under production at this moment ? I know some money is better then no money, at the present time but what about later on ?
I am neither an oponent nor proponent to the decline curve analizations that have taken place thus far , mainly because I just dont fully understand the dynamics behind it. That being said , the studies that are ongoing by some of our qualified members are showing a drastic drop in production after the first year or two.
If that is the case , arent we missing our shot at great royalty checks by seeing our gas flow at half price compaired to when the market was stable ? I understand that we dont control the market or the prices. But many, that are feeling left out in the cold , due to not being under a lease at this time , could actually do better in the long run by not being produced at this time, couldnt they ?
Most of us know that the bonus isnt what should generate the income that makes a mineral owner his/her money. ( If an area is being produced as it should ). But most dont fully understand the impact that these troubling times will have on those royalty checks.
When we hear of the hedging that these companies use to protect themselves financially over the long haul, do they also help the mineral owner as well ?
Sorry I asked so many different questions at one time. Chip them off however you see fit. Thanks and have a great day.
I am neither an oponent nor proponent to the decline curve analizations that have taken place thus far , mainly because I just dont fully understand the dynamics behind it. That being said , the studies that are ongoing by some of our qualified members are showing a drastic drop in production after the first year or two.
If that is the case , arent we missing our shot at great royalty checks by seeing our gas flow at half price compaired to when the market was stable ? I understand that we dont control the market or the prices. But many, that are feeling left out in the cold , due to not being under a lease at this time , could actually do better in the long run by not being produced at this time, couldnt they ?
Most of us know that the bonus isnt what should generate the income that makes a mineral owner his/her money. ( If an area is being produced as it should ). But most dont fully understand the impact that these troubling times will have on those royalty checks.
When we hear of the hedging that these companies use to protect themselves financially over the long haul, do they also help the mineral owner as well ?
Sorry I asked so many different questions at one time. Chip them off however you see fit. Thanks and have a great day.
Views: 62
Replies to This Discussion
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Permalink Reply by Snake Stewart on
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If you wouldnt mind DeSoto Dude, Would you or someone that has an idea of what you just said , please explain it so I might be able to understand. Thanks in advance!
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Permalink Reply by The_Baron on -
Hes basically saying the same as me. The Royalty owner will get paid the wellhead price. Hedged gas comes back to the operator later in the quarter.
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Point taken Mr. Krow,
But as a mineral owner you certainly want to do the best you can and sell or lease on the upside verses the downside. We have that luxury where the operators dont I guess. After expenses and the such, they arent really selling their product after all .With hundreds of thousands of acres under lease, their profitability range is far more flexible then the mineral owners with a very finite amount of mineral ownership. You have to make it count when you are limited to whats in your pocket.
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Permalink Reply by The_Baron on
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Snake,
Even the best market insiders can't predict oil and gas futures. It may take years from when you sign a lease till a well is drilled and starts paying royalties. Unless you know somthing we don't its hard to justify waiting till prices might go up. With inflation, every thing else will go up each year anyway.
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I agree Baron,
But when you consider that royalty checks are being slashed in half due to prices and that a bad lease is far worse then no lease at all the wait doesnt seem as bad. I dont feel that the wait will be too terribly long. Our need for affordable, clean energy will dictate that.
You dont however , have to be able to predict the future, when you are dealing with a finite source such as oil . Coupled with ever increasing demand from other (3rd world type) emerging economies, the timeline will be shortened even more. As the oil is depleted , isnt that going to push up the prices of N/G and other alternative fuels ?
Now that fuel is at a 4 or 5 year low, shouldnt everything else be going down in price ? It rose on the skirt tails of fuel. Its only a bump in the road (fuel prices). There isnt any sane reason that they are as low as they are unless we have been receiving the proverbial hammer to the head. If there is a falling off of production that cant keep up with demand, it cant take that long IMO.
I personally dont see the powers that be , allowing us to convert to some form of energy in the future that they do not control ( ie. wind, solar, hydro ) until all other sources are exhausted (N/G). By that time they will own all of those patents as well. (LOL)
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Permalink Reply by Duncan McGehee on
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KB
For one thing a compnany will not give you your gas in kind. That provision was granted so the landowner could run his household from the gas diverted from the well. Insurance will not allow the companies to do this. If they do, I'm sure there will be an iron clad indemnification if you blow you and yours up.
Also, where would you store your gas and do you think you have the juice to get the right of way, lay pipeline and deliver your gas to your storage facility?
Now you could - if you got this clause, have your interest metered at the well head, for sale to some entity of your choosing. When you do this you will meet the real pirates - the pipeline companies who will deliver your product to market.
Your best bet is to insure your share and others share are not marketed to third parties; associated with the company producing, for less than market value and resold at market value. This is not a very common practice, but if Company A produces and sells to Company B; a susidiary of Company A, at a reduced price and pays the landowner at that rate, then Company B sells at market value - you just got screwed.
How would you know this? You have to have access to several companies prices in the area and compare. This will give you a hint but may not be definitive. If you have different leases with different companies in the same area and you get checks from both each month you can compare these prices.
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Permalink Reply by The_Baron on
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Do you really want to be responsible for your own gas????
Do you have any idea how much gas is comming from these HA wells?
Last month, as cold as it was, i used less than 3 mcf !!!! What would I do with a million in a day?? You think negotiating a lease is hard, try negociating with a pipeline company. -
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Permalink Reply by The_Baron on
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Maybe we have, and realize that somtimes an idea is not in the box for a reason.
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Permalink Reply by The_Baron on
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YOu should consider each unit will have multiple wells, drilled over an extended period of time. It is reasonable to assume that some of these will be drilled in a downturn, and some in a higher priced environment. Hopefully you get more of the latter.
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Permalink Reply by The_Baron on
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The main point is I am trying to make is you can't chase gas prices. If you lease today it could be some time before production is established, maybe years.
I do agree that it would be better to have your production at its best when prices are higher, but you will need a magic eight ball to tell you when that will be.
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Again I agree with you Baron,
Quite frankly it is starting to startle me somewhat.(chuckle,chuckle)
The jest of my question was to help those that are unleased to see that all isnt bad. Not to try and dodge the lower prices( which cant be 8 balled) but to see a positive side of not being under lease or production at this time.
I dont know anybody off hand that wouldnt rather have 8 big Haynesville Shalemonsters churning out the big bucks in their section. That isnt the option for everyone at this time. No use in crying over spilled milk so we have to find something positive to look at. IMO, it is certainly a positive not being HBP during the worst looking economic thingamajig since '29. They arent going to do any better until we create a market for all this N/G and our current economic market turns around.
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