Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on June 19, 2014 at 4:22

Congrats, DJ.  You authored a discussion thread.  A lot of the archived discussions are about the Haynesville Shale.  Due to it's high level of drilling in the early days payment of royalties was abnormally delayed.  It takes a lot of work and time to perform a division order review and the professionals that do it are not great in number.  Whenever there is  a lot of wells drilled in a compressed time frame, division order projects back up and the back log can take many months indeed years to work through.  From first production to first royalty payment will vary based on a number of factors so it's hard to predict.  The most recently completed horizontal Haynesville Shale well of which I am aware was completed and turn to sales in early April and first royalty payments are scheduled for mid-July.  Other than examples such as the early Haynesville Shale madness I'd say 90 to 120 days would be a reasonable time frame.

Permalink Reply by Franks on June 19, 2014 at 4:45

Skip and all,  Thanks!  Is it common or even possible for some to try and cash-out (lump sum) upon receipt of the division orders? 

Permalink Reply by Skip Peel - Mineral Consultant on June 19, 2014 at 4:54

DJ, if you are referring to selling your minerals, yes it is somewhat common and can be done.  However for those of us in the business the term, "cash out", is often taken to mean leasing the minerals for the bonus [payment, then selling the mineral rights and finally selling the surface, if owned.  I know several mineral owners who did just that in the heady early days of the Haynesville Shale.  They realized enough, after taxes, to  have long term financial security and to start a new chapter in their lives.  It's one way to monetize a mineral/land asset and avoid any future risk.

Permalink Reply by Gaynell Roberts on June 19, 2014 at 4:59

Thanks for the info on when to anticipate royalty checks and wellhead prices.  Maybe, we are a little too anxious to know any information before the well is even complete.  However, it is fun to learn about the business and DREAM.

Permalink Reply by Skip Peel - Mineral Consultant on June 19, 2014 at 5:37

It is nice to have a dream.  It is even better to have one supported by some ongoing activity in your proximity.  Along with dreaming I would suggest a little homework. For Livingston Parish group members, I suggest you start here:

http://www.gohaynesvilleshale.com/group/sonris_help_center

Permalink Reply by Franks on July 11, 2014 at 19:41

How much to Pay for Oil Royalties (2010 Video:)
https://www.youtube.com/watch?v=or_H011bxuE

Permalink Reply by Skip Peel - Mineral Consultant on July 12, 2014 at 1:26

Blackbeard Data is talking about conventional reservoir production as evidenced by the mention of water flood and tertiary recovery both of which are used in largely depleted stripper fields.  In those cases the term, Steady State, might have some relevance.  In unconventional reservoirs few royalty buyers are paying 30 months.  Because of decline characteristics most take an average over several months, usually at least 3, then apply a multiplier.  The range is generally 60 to 120.  That works to mitigate risk and avoid overpaying for the buyer.  However in the case of unconventional reservoirs the majority of production is unitized.  Where that is the case the important value determination for a seller is how many wells can one unit hold and how many have been drilled to date.  Unfortunately most royalty buyers are loath to offer outside their standard value model.