ROYALTY INCOME DECLINES WITH THE DECLINE IN WELL PRODUCTION
For the purpose of this example, I will use several constant values. The following royalty payment calculations are based on 1 acre, a 640 acre production unit with 1well and a 25% royalty. Also the recent CHK report average for their 16 producing horizontal HS wells of 10.0 mmcfe/day (million cubic feet equivalent per day). That amount will be reduced yearly over a five year period based on the CHK decline curve data contained in the same report. I will plug in the following values for the price of a mcfd (thousand cubic feet per day): Year 1: $8, Year 2 : $9, Year 3: $10, Year 4: $11 and Year 5: $12.
Royalty per year:
Year 1: $11,375
Year 2: $2,431
Year 3: $1,783
Year 4: $1,530
Year 5: $1,205
These are arbitrary values that may not accurately reflect the production of your well nor the future price of natural gas. I offer the calculations as a way to emphasize the nature of royalty income. It declines as well head production declines. There are royalty calculators accessible on the Web. I have used several and the variance between their results is extremely slight. Forewarned is Forearmed. Good Luck, Skip
Royalty per year:
Year 1: $11,375
Year 2: $2,431
Year 3: $1,783
Year 4: $1,530
Year 5: $1,205
These are arbitrary values that may not accurately reflect the production of your well nor the future price of natural gas. I offer the calculations as a way to emphasize the nature of royalty income. It declines as well head production declines. There are royalty calculators accessible on the Web. I have used several and the variance between their results is extremely slight. Forewarned is Forearmed. Good Luck, Skip
Views: 397
Replies to This Discussion
-
landownerPermalink Reply by JeffNParis on -
Skip,
Given that two years have passed since the above projections, how much have things changed?
JeffNParis
-
Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on -
Most operators have instituted restrictive choke programs as the consensus appears to be that it improves Estimated Ultimate Recoverable (EUR) reserves per well. A few operators that have publicly touted the restricted choke concept have estimated first year decline on wells properly restricted appear to be approximately 50%. I don't think there is a simple formula to turn a choke setting into a EUR projection. In general the common choke settings when operators projected ~80% first year decline were in the 22/64" to 26/64" range. You still see a few Initial Production reports in that range but it has become rare. Restricted wells have a wider range but I would guesstimate that the majority are in the 10/64" to 16/64" range. In some areas of the Play restricted choke setting are directly related to pipeline capacity.
- ‹ Previous
- 1
- 2
- 3
- Next ›
📧 Want email updates on new discussions?
Click Forum and scroll down past the last discussion and click the "Follow" button.
Click Forum and scroll down past the last discussion and click the "Follow" button.
Top Content
Groups
-
Natchitoches Parish
409 members
-
Red River Parish
307 members
-
Unleased Mineral Owners
286 members
-
ALTERNATE ENERGY TECHNOL…
6 members
-
Union County, AR
49 members
© 2026 Created by Keith Mauck (Site Publisher).
Powered by
