Is $81,250 Total Return a conservative estimate for royalties over the life of the play for 1 acre? Or I could use Cheseapeake's numbers and arrive at $142,187.50
Check my math.
If the EUR for 1 section is 52 BCF
divide 52,000,000,000 by 640 acres
81,250,000
divided by 4 (25% royalty)
20,312,500
divided by 1,000 (mcf)
2,031,250
multiplied by $4.00 per mcf
EQUALS
$81,250
Does this sound reasonable?
Did I forget to include something.
I tried to be VERY CONSERVATIVE.
FOR SOME REASON CHESAPEAKE HAS A STORY OUT USING $7.00 FLAT PRICE FOR GAS. I ADDED THIS TOO JUST FOR FUN.
If the EUR for 1 section is 52 BCF
divide 52,000,000,000 by 640 acres
81,250,000
divided by 4 (25% royalty)
20,312,500
divided by 1,000 (mcf)
2,031,250
multiplied by $4.00 per mcf
EQUALS
$81,250
Does this sound reasonable?
Did I forget to include something.
I tried to be VERY CONSERVATIVE.
FOR SOME REASON CHESAPEAKE HAS A STORY OUT USING $7.00 FLAT PRICE FOR GAS. I ADDED THIS TOO JUST FOR FUN.
Views: 191
Replies to This Discussion
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Permalink Reply by Dion Warr, CPL on -
Sesport:
If you have no scruples, you may wish to consider sending out mass mailings to all lessors that you can find on current leases in a parish of your choosing including preprinted letters, measly preprinted checks and offers to buy your Haynesville Shale mineral royalty acres for top $$$ by cashing said measly check.
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Permalink Reply by sesport on
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LOL ... well, Dion, that won't work for me, then. I'd be more inclined to make mass mailings to warn folks about those measly checks. Matter of fact, you just reminded me to check on the status of doing some mass mailings to my neighborhood since we're being contacted by landmen.
But thanks anyway. ;0)
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Permalink Reply by Dion Warr, CPL on
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Sesport:
IMO, they'll be fine if they are being contacted by landmen; Shalers have learned the ropes.
It's those other shysters people should be worried about.
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Permalink Reply by Tom adams on
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The math in your calculation works; however, you are omitting the time value of money. To a achieve those reserves/section you will need 8 wells/section which may take 3-10 years depending upon how long gas prices stay at the current depressed prices. Also, you will have to pay LA advalorem and severance tax out of your proceeds unless you have a way around that. (Lot's of folks would be interested in how to do that..).
When you factor in risk and time value of money after state taxes you get a number considerably lower than that for value of minerals... I believe minerals have been sold in the area in the $10-15K/acre. Royalty acre sales are a completely different sale and involve computation of royalty acres (8 to 1) vs mineral acres...(another topic for another day)...
I haven't seen anyone projecting $7 gas lately.. most of the big guys drilling out here are placing hedges for just over $5/mmbtu in 2010...
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Permalink Reply by Bobi Carr ("parker") on
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Tom,
I didn't say that I was trying to get at the present value of the minerals. I just thought it would be a fun example to throw out there. It is not however just grabbing numbers from thin air but from information that Chesapeake has supplied. I truly believe the numbers will end up being higher than that. I will start a discussion on the present value of minerals and we can discuss that too.
But I will tell you this. If 10 years ago someone would have told me that CV production could pay the royalties that they have paid, I would have thought they were out of their mind.
My example is only to make people step back and think of the amazing possibility that the HS may bring. It will change this area. It is inconceivable at just how much it will.
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Permalink Reply by RJ on
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OK What am I doing wrong. I went to the Natural Gas calculator and plugged in 1 acre,640 in section at $4.00 and a well producing 8milion. The calculator came up with 367.00 dollars for one acre a month. Now thats 4400.00 per year for one acre.
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Permalink Reply by Skip Peel - Mineral Consultant on
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The problem may lie in the royalty you entered. Most calculators call for a % so do not plug in a number beginning with a decimal. The first year's income should be less than the first month times 12. It's that dang decline thing again.
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Permalink Reply by Bobi Carr ("parker") on
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Don't forget that as they keep drilling that the EUR's seem to keep going up.
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Permalink Reply by lanadan Ds3 on
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E&E,
As one "barefoot" UMO to another, just why is it that so many "smarty-pants" on this site consider us ignorant or just plain stupid ? Huh ?
I'm in a section where a well has just been completed, frac'd and is being tied into a pipeline (no producton figures as yet, however ) . Maybe I'm being hard-headed, obstinate, or whatever -- I don't care -- , but I'm simply not going to roll over and let CHK have my minerals for peanuts !
I guess you could call me (among other things I am sure ) an UMO "guinea pig" experiment as I am determined to ride this well out just to see what happens. Mama's got her spurs on, an' hollerin " . . . Yahoo -- ride em cowboy . . . " (or cowgirl, whichever the case may be).
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