Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on August 1, 2009 at 14:33

Hey, olddog. All the on-line calculators that I have used were around before the HS. I believe they use decline variables based on conventional gas production, not shale gas and certainly not the Haynesville Shale. The ~67% differential is based on an estimate that the decline for conventional gas wells is ~50% and the HS 82 to 85% in the first year. It's a guess but I hope it's in the ball park. If you had a first month royalty of $1000, the thirteenth month would be ~$150, a decline of ~85%. If the thirteenth month was $150, the 25th. month would be ~ $99.00, a 34% decline in the second year. The $99.00 25th. month would be ~ $77.22, a 22% decline in month 37. Etc. It would be a great feature if GHS had it's own calculator using the HS decline estimate.

Permalink Reply by olddog573 on August 1, 2009 at 13:25

gambler, yes, just multiply yearly result by the amount of acres you have. Example, 7998 * number of acres = yearly income from total acres.

Permalink Reply by Gambler on August 1, 2009 at 14:02

That sure is alot of decline after the first year. Do they really drop off that much or do the people running the well do it?

Permalink Reply by olddog573 on August 1, 2009 at 14:48

That's almost depressing. Kinda makes you wish they would never drill but would give you good lease payments every 3 years.

Permalink Reply by olddog573 on August 1, 2009 at 14:49

there can only be so much gas in place so I would say it's both. i don't want them to drill on mine till gas goes back up.

Permalink Reply by Skip Peel - Mineral Consultant on August 1, 2009 at 15:08

Over the life of your lease you should get 6 to 8 wells. Some will have their greatest production during periods of higher price and some at lesser. Eventually you will have combined production and royalty from them all. For most of us, it's income we never planned on. It can be a real blessing if we just use it wisely. Part of accomplishing the wise management of royalty income is understanding how it fluctuates over time.

Permalink Reply by Gambler on August 1, 2009 at 16:04

Yea it is kinda depressing but what can you do. They got the lease so.I wish gas would go back up but i dont see that happening for awhile.I dont understand what you mean Skip about getting 6 to 8 wells? I thought that if they hit and it runs out that they wouldnt drill that unit again?Yea i dont plan on using any royalty money that i receive for a long time. Just plan on getting it and investing it.

Permalink Reply by Skip Peel - Mineral Consultant on August 2, 2009 at 2:26

Most of us will get multiple wells up to a maximum of 8 under current spacing regulations. It is estimated that it will take 6 to 8 wells to efficiently drain the standard 640 +/- acre section/drilling unit. Larger units will have more wells based on 80 acre spacing but every lessor (no matter the unit size) will share in the production (royalty) of each and every well. Therefore your royalty will fluctuate over the commercial life of the wells in your unit.

Permalink Reply by David on September 9, 2009 at 5:26

Skip,

Having received royalty payments for some time, I can echo your comments. There are two things we can count on: the price will go up and the price will go down. I can remember getting $1.70 for gas after it had been two to three times higher earlier.

While we would all love NG to be t $10 and to have gently declining production curves extending out 20 years or more, that isn't the way it works, is it?

Permalink Reply by Keith Mauck (Site Publisher) on September 9, 2009 at 5:31

So, it seems possible that the 3rd or 4th well could be as productive as the 1st, or am I reading you wrong?

Permalink Reply by Mike C. Miller on September 9, 2009 at 16:07

I have reduced the data given by Skip in his second set of calculations to a Excel spreadsheet that allows you to calculate the same data for any given acreage, royalty rate, gas flow, and gas price. My spread sheet uses one gas price for the entire ten year period though it could easily be modified to use a different price for each year. Very interesting information.

I would be glad to share my work, although I certainly don't want to vouch for either my math or Skip's (or Chesapeake's) decline rate estimates. Is there any way to upload a spreadsheet to the forum?

Permalink Reply by Keith Mauck (Site Publisher) on September 10, 2009 at 8:20

email it to me at haynesvilleshale@yahoo.com

• ‹ Previous
• 1
• 2
• Next ›
• Page