Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 9:00

Aegis. First things first. Have you figured out your decimal interest in the production of these wells?

Size of your mineral interest in acres divided by the total acres in the drilling unit times you royalty percentage for each.


It sounds like the royalty is a three sixteenth. If that's the case, multiply by .1875, not .18.

Example: 40 acres in a 640 acre unit would be 0.0625. Times a three sixteenth royalty - .1875 = 0.0117187.

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 9:35

Using the Oct. 2009 production of 194,256 Mcf, you can convert it to cubic feet by adding three zeros but gas is priced and sold and royalties are figured by Mcf so just take that figure and apply your royalty fraction from the first example. 194,256 X 0.0117187 = 2,276.43 Mcf. From here you are on your own because you have to know what the price per Mcf your operator sells your gas at and whether your royalty interest is subject to any deductions. Go the "View All" command at the bottom of the Main Page discussions and using the search box enter a key word. Find the recent discussions where other members have posted the price their gas was sold at in order to get an idea of a reasonable figure to use for your calculations. And remember it varies monthly. You might wish to ask some questions in those archive discussions in order to find out what members with the same operator and in the same general area are currently receiving. Keep in mind the following: the monthly figures reported on SONRIS may or may not represent the full production capability of your well (some are choked back because of insufficient capacity in the gathering system) and the HS wells decline quickly. By all current measures somewhere in the 80% to 85% range first year.

Permalink Reply by Aegis on January 28, 2010 at 12:24

By "decline quickly" you mean that they lose 80-85% of capacity in the first year, or that they only retain that amount (ie, lose 15-20%)? Super-sorry if these questions seem exceedingly noob, I am simply trying to learn what I can to properly plan for and manage this unexpected life event :).

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 12:36

The production of all wells, oil or gas, exhibit declines in production as formation pressure is dissipated. The huge initial gas production of Haynesville Shale wells is the result of high formation pressures which dissipate steeply over the first 4 to 5 years and then maintain a relatively steady production rate for the remainder of their commercial life. Go to the archives and search using the key words, decline rate. You will find numerous discussions.

Permalink Reply by Aegis on January 28, 2010 at 11:23

Hmm. Any idea of how to determine what a "drilling unit" is? As a family, we own 36 acres, of which my wife and I own 6 (so whatever revenue we have is split 6 ways) but I have no idea of what the "drilling unit" is. I assume it's a pool of acreage, and the production from a well in the unit is pooled with the production from other wells in the unit, and then all people who have rights are given percentages according to what percentage of land they own (like, if there was a single well on 100 acres, and two people owned 50% of the land each, then each would get 1/2 of the revenue from that well, minus all the fees/deductions)

We are leased by EnCana, which I understand is one of the smaller players. I've attached the first page of the well report, to see what you make of it. I can't see anything there that tells me what size my drilling unit is. Is there a simple way to find out?

The property was given to us by my father-in-law, and I don't want to pester him with endless questions about it.

Finally, is there any danger in allowing the location of the wells to be known? I know, it probably sounds dumb but I am simply trying to make sure since I have little experience in this field yet.

The 3/16th sounds familiar, so I will go by that. I know it isn't higher than that. And I am fairly sure we don't have any deductions from revenue - we don't have to wait for the company to cover costs or anything like that.

Attachments:

• Wells-239536-1.jpg, 245 KB

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 11:42

Aegis, you've got the idea. Give me the Serial Number for the well and I will tell you the size of the unit. It's a good idea not to give out all the information regarding your well but basics like s-t-r, serial number, operator will not cause you any problems. Actually Encana is one of the biggest Shale Players in the Haynesville. And a respected company and capable operator.

Permalink Reply by Aegis on January 28, 2010 at 12:05

What specifically should shalers avoid talking about RE the wells? I guess if they are already leased, then its all moot - I mean, knowing the location (STR, Serials, etc) pretty much gives people what they need to know. I certainly won't tell people WHO owns the land, because that's just mad, but I figure once you say WHERE it is, then WHO it is is simply a matter of digging in public records, no?

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 12:22

Correct. I'll get back to you shortly with the acres for your unit.

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 13:01

Use 640 acres for the size of the unit. I don't have time to look up all the information that you wish to know but I make time to help members learn how to do so for themselves.

Permalink Reply by Aegis on January 28, 2010 at 13:10

I appreciate it. I'd love to know how to figure things out, and I am certainly willing to learn. It looked like the unit was the same size as a section. Is that pretty common?

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2010 at 13:22

Yes. Standard sections are 640 +/- acres. Those sections located in particular parts of a township exhibit more variation than others but that's what those archived discussions are for. IANAS (I am not a surveyor). Some townships have irregular sections and some more that 36. If that does not effect your sections, let's not even go there. Once again, the archives have comprehensive discussions by members with specific expertise on this sebject.

Permalink Reply by Aegis on January 28, 2010 at 15:14

Thank you for all your help, Skip. It's greatly appreciated.