Info taken from shreveporttimes.com
Stonewall resident Kassi Fitzgerald offers advice from her viewpoint as a landowner:
Limit the number of wells on your property.
Specify the distance from your home for drilling activities and placement of tanks.
Stipulate where access roads may be built.
Consider requiring fencing along the access road on your property.
Require prompt payment for damages to your home or property due to access, testing or drilling activity.
Require that your property be returned to its prior condition when drilling is completed.
Require safe disposal of waste from drilling.
Require adequate drainage management on your property.
Ask about noise abatement technology.
Discuss your royalty rate prior to signing and set a start date for payments.
Spend money on a lawyer to review the contract prior to signing.
MCF = Thousand Cubic Feet
MMCF = Thousand Thousand Cubic Feet = Million Cubic Feet
BCF = Billion Cubic Feet
E = Equivalent (as in BCFE = Billion Cubic Feet Equivalent)
RI = Royalty Interest
You own 85 acres of minerals in a 640-acre unit for a gas well that was recently drilled and put on line. With professional assistance, you were successful in getting a 27-percent cost-free royalty stipulated in your oil and gas lease agreement. From that, your royalty interest (RI) in the unit is calculated as:
RI = (85/640) X 0.27 = 0.035859
If in the month of April the gas well made 336 million cubic feet (MMCF) of natural gas, that's 336,000 MCF of natural gas. And if that gas is sold for $10.50 per MCF, the gross price of the natural gas sold for the month of April is 336,000 X $10.50 = $3,522,750. Your share of the sale of the gas, or your royalty, is 0.035859 X $3,522,750 = $126,324.
In this example, if you had signed the standard lease that the landman asked you to sign, which requires you to pay a share of the costs of transportation of the gas (by pipeline), marketing and/or other such costs, and if you had taken the 1/6 royalty the landman offered, your royalty would have been only $77,978, less deductions for your share of the costs, which can amount to as much as 20 percent of the gross.
You own seven acres of minerals in a 640-acre unit for a gas well. You made the mistake of not getting professional assistance, and you signed a lease for only 3/16 royalty. In a single month, the well produced 76,250 MCF of natural gas. It's summer, and the price of natural gas has dropped to $8.50.
RI = (7/640) X (3/16) = 0.002051
Gross price of natural gas sold = 76,250 X $8.50 = $648,125
Your royalty = 0.002051 X $648,125 = $1,329.
In this example, had you gotten professional assistance and gotten a 30-percent royalty, your share of the gas produced in that month, or your royalty, would have been $2,127.