Replies to This Discussion

Permalink Reply by Tahoe on July 8, 2010 at 5:56

Royalties are paid two months after the month of production. You will be paid for however many months the well has been producing up to the prior two months when the company issues a check. Don't go on a spending spree yet. We have received a couple of royalty checks and they are no where near what we were expecting. The price of gas is horrible so royalties aren't very good right now. I was hoping the volume that was being sold would overcome the low price and still have a decent check but so far I've been wrong. I can't begin to tell how the royalties are calculated. There are some links to information on this site. You can search and find a few good responses to that question. There are MANY factors that go into the calculation.....

Permalink Reply by Gary on July 8, 2010 at 14:50

The royalty SHOULD be calculated based roughly on the following parameters:
1) Your proportionate percentage of the site (for example if you have 20 acres and the site covers a perfect section size of 640 acres, you would have 40/640 for this portion. <--Times
2) Your royalty percentage. For example, 25% <-- Times
3) The production volume for the month, for example 80451.06 <-- Times
4) The Price <--- This may be worth paying attention to if Chessapeake is involved
5) Minus any taxes and other deductions (this is only a rough view)

The price should be set each month for that month's production and Gas price.
Beware I am a novice here, so my input is not legally binding ;->

If I can better understand what CHK is doing with the "well under fair marked price" for GAS and with the changing "Payment Decimal". I may post again. If anyone has insight to how CHK is getting away with declaring gas prices so much lower than Well-Head Prices and Marathon prices, or changing Payment Decimal entries, I'd very much like to hear from you.

Regards,
Gary
Regards,
Gary

Permalink Reply by Linda Whatley on July 9, 2010 at 9:33

Gary,

I've heard the same thing about Chesapeake, and I'd like to know how they get away with it too. I have four leases with them, and I sure don't want them to underpay me. ..... Please keep me posted if you find out any more information on this issue.

Thanks,
Linda,

Permalink Reply by OLD HILLBILLY on July 28, 2010 at 6:02

we received one , than they cut production back ,Chesapeak will not pay unless your account is $100, or more. one check in nearly a year and it was $139, on 2 ac , we are all screwed ,

Permalink Reply by R.R.Woodard on July 28, 2010 at 6:30

Old Hillbilly your check was for how many acres,

it nothing like the land man from Porter was promising when he said sign this contract

Permalink Reply by Bob and Lisa on July 28, 2010 at 9:27

They will promise you the moon and stars to get those leases signed. Glad we didn't.

Permalink Reply by Crunchy on July 29, 2010 at 3:32

What was the production for that year?

Permalink Reply by Redneck Girl on July 30, 2010 at 12:36

Hey Old Hillbilly. I was talking to my uncle on what was going on with the production for the well that is on our site. He has been speaking with a Patsy on a monthly bases and she informed him that they were doing something to our well and that production SHOULD increase 4x. I'm not holding my breath and I have no clue what that SOMETHING is. When I find out I will let you know. All I know is the $39 that I got for the last two months of production, they can keep it.

Permalink Reply by Foxiecajun on August 1, 2010 at 2:15

Well I finally got one! Yesterday! For my .69 of an acre. Got a whole 63.86 guess they felt sorry for me and went ahead and sent it!

Permalink Reply by Lyelv on July 30, 2010 at 5:20

It's a pretty straightforward calculation. (Percentage of the prod unit you own x royalty percentage) x (gas price x production volume)
Example:
You own 80 acres in a 640 acre production unit. 80/640 = .125 (12.5% of the unit)
25% royalty (.25) x .125 = .0313 (this is your payment decimal)
Price of gas $5/mcf.
monthly Production 300mmcf.
$5 x 300,000 = $1,500,000 total gas sales
$1,500,000 x .0313(payment decimal) = $46,875 your royalty.

Hope this helps. Watch that payment decimal. Ours was calculated wrong by Chesapeake!!

Permalink Reply by Gary on July 30, 2010 at 6:46

Lyelv:
Is your "payment decimal" a constant? I believe it should be; however ours varies month to month with no discernible pattern to the variations.
Also, have you noticed the "Price" being significantly lower than fair market value? I'm wondering if CHK also "fudges" the price per owner, or if they are "underpaying" everyone. So far, I notice larger price discrepancies for months with lower Gas prices.

Regards,
Gary

Permalink Reply by Lyelv on July 30, 2010 at 6:55

Gary,

The payment decimal should in fact be a constant, but what we have seen is that some of these companies are sending out new division orders altering the acreage in the production unit, by sometimes only a couple of acres or so. When they do this naturally the payment decimal will change. The price is also subject to much debate. I wish they would simply post the price per day used in the calculation and the source of that price. It's seems impossible to get anywhere with these companies when you ask!!

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