Replies to This Discussion

Permalink Reply by Henry on May 3, 2010 at 12:22

tandg,
Once you know the production, it's easy.

1. Take the entire production for the section and divide by 640. Multiply that by the number of acres you own. This represents the amount of gas that is allocated to the land you own.

2. Next, multiply that by your royalty percentage. You now have the total amount of gas that you are selling.

3. Multiply the amount of gas you are selling by the going price. This, in principle is what you should get. But....

4. You will have to deduct some for severance tax, dehydration, clean-up, and transportation, etc., depending on the terms of your lease.

Hope this helps. If you have actual numbers for production, someone on this site will help walk you through the calculation.

Permalink Reply by Tahoe on May 4, 2010 at 1:46

Are you figuring production for the month or production for the day? I've heard of some wells producing 18,000,000 mcf. I'm assuming that's a monthly production number?

Permalink Reply by Parkdota on May 4, 2010 at 2:59

Try this link...maybe it'll help. Some wells produce 18mcf a day, not a month. Isn't it great?

http://geology.com/royalty/

Permalink Reply by Skip Peel - Mineral Consultant on May 4, 2010 at 3:14

The Geology.Com royalty calculator does not utilize the Haynesville Shale decline curve in its formula. No online calculators that I am aware of do. IMO, they all use decline variables that are within reasonable parameters for conventional resource production. Probably around 50% for first year decline as opposed to 80% for the shale. They may be entertaining to experiment with but are not sufficiently accurate to depend on when making decisions related to a mineral estate.

Permalink Reply by Tahoe on May 4, 2010 at 3:18

Skip-- What is your recommendation for the most accurate royalty estimate using Haynesville Shale data?

Permalink Reply by Crunchy on May 4, 2010 at 3:26

There was a post on this site. A fellow member made an excel spread sheet that had a better decline curve.
http://www.gohaynesvilleshale.com/forum/topics/yet-another-royalty-...

Permalink Reply by Skip Peel - Mineral Consultant on May 4, 2010 at 3:27

There have been several posted to the site and a couple of members working on models. I haven't heard anything new lately. Try a search of the archived discussions. Keith and I have also discussed the possibility of a GHS HS royalty calculator in the past. I think it would be an excellent idea but I am not qualified to review or endorse the accuracy of such a calculation formula.

Permalink Reply by Parkdota on May 4, 2010 at 6:29

I have my own excell program and I've been using the original decline model of 80% in the 1st year, etc. I've noticed, though, with the tighter chokes that the decline in some areas in the 1st year is only 65%-80%. One thing to mention, is that the 1st year decline is steep at the outset so it's hard to use a formula on unless you are breaking it down from month to month which I've done. I basically factor in mirror production declines of surrounding wells for the 1st year due to this difficulty on a month to month basis. Then in the 2nd year and on it appears to decline at a more steady rate thus making an excell model more useful as I can then use standard industry decline numbers for the HA. I also make it to where I can change the month to month pricing to be more realistic.

Permalink Reply by Tahoe on May 4, 2010 at 7:16

Would you be willing to share your spreadsheet?

Permalink Reply by Parkdota on May 4, 2010 at 10:46

I'd be more than happy too...but, my excell spreadsheet is very custom. I didn't set it up for others, which I probably should have. It is four pages of various scenarios, and I tried to convert it for you but it was taking far too long. So, I just deleted everything and made a simple one page. The red boxes are the only numbers you have to input, and the blue ones can be altered based on pricing and your tax scenario. The tax box (blue) is based on a 20% tax scenario. The 1st year on this spreadsheet doesn't work due to the HA steep decline so don't think that the dollar amount that pops up is right. You can manually do it for your own numbers according to surrounding wells or you can basically drop it 10-20%. The 2nd year and on should be fine. If you don't know excell I'd only change the two red boxes for 1st year production and your share. This spreadsheet is nothing fancy but maybe it'll help you.

Attachments:

• GasProductionPublic.xls, 89 KB

Permalink Reply by tandg on May 7, 2010 at 10:28

Thanks for the info. I thought that this was the way to do it. When I start getting production figures I will use this method.

Permalink Reply by J B Nabors on May 12, 2010 at 7:37

Henry gave you the essentials:

1. Take the number of acres you own.
1(a). If you share the property with other owners, multiply by your fractional interest.
2. Divide by the number of acres in the unit.
3. Multiply by your royalty percentage. (don't forget the decimal!)
4. Multiply by the monthly production. (obtainable on SONRIS)
5. Multiply by the (approximated) going price per unit of production.
6. Deduct some expenses

Example: you own an equal share (with your brother and sister) in 40 acres in a 640 acre Haynesville unit, leased at 25%. The well produced 30,000 MCF in the month, and you guess the average production selling price was $4.00 per MCF.

40 acres
x 1/3 (your ownership of the 40 acres)
/ 640 acres in the unit
x 0.25 your leased royalties
x 30,000 MCF (from SONRIS)
x $4.00 / MCF (guesstimated average selling price)
- 10% (guesstimated expenses)
======================
= ~$2,250

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