Replies to This Discussion

Permalink Reply by Les Bamburg on August 14, 2010 at 6:44

JD, it was just a reminder that one can use NYMEX as the benchmark but you have to include an adjustment (basis) to get a price relevant to the specific producing region and/or gas sales pipeline. For your May example CenterPoint Gas Transmission (CEGT) was $0.30 below NYMEX. Just recall my recent post in another forum.

"...I would just suggest you take a few months of royalty statements and compare each month's "wellhead" price to the final NYMEX settlement price for that month. It should give some idea of the differential to NYMEX (ie 40 cents below NYMEX). For future months you can use this diffential to estimate what should be a reasonable wellhead price based on the final NYMEX settlement price...

Also, once you calculate this differential you can ask the operator for information that may help explain how much is related to transportation costs versus other deductions."

Permalink Reply by JD on August 14, 2010 at 7:20

Les B,

For clarification, my issue is not with the NYMEX. My issue is with the price CHX pays the royalty owners. As you stated, Centerpoint was $.30 below NYMEX in May. CHX reduced their payment to me in May an an additional $.60 before they arrived $3.37. That is my issue.

Back to my question. In your opinion, shouldn't we have reasonably expected to receive in the neighborhood of $3.97 for gas in the month 05 May if we had the clauses in our lease that I mentioned above? If you don't want to answer my question, please don't. But please don't take my concern and point it in another direction.

Respectfully,
JD

Permalink Reply by Les Bamburg on August 14, 2010 at 9:57

JD, sorry but my clarification was directed at your opening statement in the post:

"Earlier in our our discussions you steered us toward the NYMEX when we spoke of Henry Hub. Your comment shows below. Now you are steering us back toward the Louisiana area. Seems like a cat and mouse game trying to pin you down for an opinion."

Now regarding your question about your May gas price of $3.97, that would be dependent upon a couple of key factors. (1) What is the pipeline network Chesapeake is using for offtake of your lease? (2) What are the transportation costs on the gas pipeline(s)? If you can provide any additional information such as field name, section-township-range, etc I will try to identify where the gas may be going.

The two factors above will have a significant bearing on the natural gas price at the unit location.

Permalink Reply by kittycatmama on August 14, 2010 at 11:27

JD, I am trying to pull up the attachment & can't. Can you repost it

Permalink Reply by Henry on August 14, 2010 at 6:00

JD,
I would advise you to go to a lawyer to get the right language for your lease. But, I can tell you this....

I just received data from a person who was leased to Chesapeake. He got prices far above what all other Chesapeake people are reporting. I checked back, and indeed, he had a lease clause that protects him against the lessee selling to an affiliated party.

I will be updating my data and posting the new data soon.

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Permalink Reply by Les Bamburg on August 14, 2010 at 3:44

Henry, this is not necessarily a case of "shady dealings" but rather just adding language to avoid confusion in the future. These type provisions are very common in industry agreements.

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Permalink Reply by Henry on August 14, 2010 at 5:55

Les,
Thanks for pointing out my error. I overstated things. My bad.

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Permalink Reply by Crunchy on August 14, 2010 at 3:27

Centerpoint and Enc. are definitely two different entities. Enc. laid the pipeline from your area across our property. When Centerpoint came in we had to sign a document that relieved Enc of responsibility and assigns it to Centerpoint. I heard that they may receive a % for transportation.
Can't wait until they start pumping. I will definitely give my info.

My attorney said that Encana got into some trouble for charging really high transport costs. (For those of you that don't have a cost free lease)

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Permalink Reply by Bill McDaniel on August 12, 2010 at 12:55

Henry, forgive me if I interrupt the discussion and digress a little bit. I believe that with a little work, the data could be a lot more revealing. I firmly believe that you need to get a handle on deductions and price at the same time. There are two primary ways to screw the royalty owners. First, you can expense literally anything and deduct the royalty owners share, or if necessary cook the price, or both. Here is my suggestion. I understand that many people do not want to reveal the amount of their check, so keeping that in mind, I'll use the following example using my actual last months data.
I am leased.
I do not have a no-cost lease.
Camterra sent me my check (not important that Empresa leased, Camterra drilled, and next month CHK sends check. Next month it is important to show a change in payor.
Asking for the field, parish, state, etc. is fine.
Price: 4.0546
quantity 95,594
gross $387595.91
Deductions: $75428.48
My deductions: .197328 (get this number by dividing your deductions by your gross. If zero, state zero.

From the data, you can tell in a glance what is going on with old Bill, but you don't know whether he got $10.00 or $100,000. You can see that Empresa is charging off a huge deduction, but the price of their gas is in line with most others but could be cooking the books with charge-offs. Just a side note, when I compared my percent to Empresa's percent, it didn't match. They screwed me out of $20 in the calculation!!! Note to all--watch you back side! Run the numbers yourself.

I'm also extremely interested if the no-cost lease shows deductions by the lessee, but zero in the deductions column for the royalty owner.

Thanks, Bill

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Permalink Reply by Bill McDaniel on August 12, 2010 at 14:20

I'm sorry, but if you read the next to the last paragraph above again, please substitute Camterra for Empresa.
May not matter, they are both dead, but it may really confuse you.
Bill

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Permalink Reply by Jeff on August 14, 2010 at 12:34

Henry,
I have 2 from JW operating. Desoto parish 27-15-13 and 22-15-13. The last 3 months are:

March 4.20 and 4.54
April 3.36 and 3.63
May 3.71 and 4.02
Don't know why they are different, they are on the same pad and go into the same pipeline. We stay 2 mos behind. Should have June next week. They are deducting costs listed as GATH, LASEV, AND TREAT.
I hope this helps you out. Jeff

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Permalink Reply by Les Bamburg on August 14, 2010 at 12:53

Jeff, those costs would be gathering, La severance tax & gas treating. Are the prices before or after the three deductions?

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