royalty question for a family member

It can vary greatly,

Depends on the price of Natural gas and the amount produced for the month.

When the price goes down they sometimes cut back production to near nothing.

What royalty is she getting paid? Assuming the section is a full 640 acres, then her participation in the unit is as follows:

35/640*RI

This give you your participation in the GU. From there, you'll need to know what the market price of the gas is. A conservative estimate would be b/w $3.50 and $4.00/mcf, but that doesn't include any expenses the company is paying for. If it's really putting out 28,000,000, I'd imagine it's pretty significant.

thats one of my biggest questions...the well is on another persons property so she has no lease with that company...only the pool has her land on it 35 acres and she is on the pay roll to get royalties...is there a standard royalty for people in a pool that are not lease holders?

at current natural gas prices $4.80...

and assuming 25% to the landowners...

28000000*0.25*(35/640)/1000*$4.80=1,837.50/day*30day/month

$55,125 / month.

Now, there are a few fees etc that will bring this down. Also, as a previous poster said, this will vary widely with natural gas prices. The check should have the nat gas price for the month on it. Also, the checks normally run 2-4 months behind.

I'm assuming she signed a lease and was not force pooled etc. That would completely change things.

quote:

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Poor assumption.

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?tell us what acreage you would have assumed?

Ok here are the basics of Louisiana pooling and unitization:

When an oil company wants to drill for oil under land, they naturally drain oil/gas from neighboring tracts even though the well is next door. This happens even if they drill vertically only. So, neighboring mineral owners rightly expect to be compensated for their share of the minerals extracted.

To address this need, Louisiana "pools" all the minerals in a given area into one Unit. The area, especially with Haynesville wells, is typically a 640 acre (1 square mile) block called a section.

So if XYZ company drills a well on a 40 acre tract in that unit, everyone in that unit is entitled to their pro rata share of the costs and revenues. If you own 320 acres of minerals, you are entitled to 50% (320/640) of the costs and 50% of the revenues, even if someone else drills the well.

Since the costs of a Haynesville well are $8-$10 million, most people choose to lease their rights to a company in exchange for a flat dollar amount (called a bonus) and a percentage of their pro rata share of the royalty.

So if you have 320 acres and you lease with a 25% royalty you are now entitled to 25% of 50% of the revenues and little to no costs.

If you lease to someone and they're not the company drilling (called the operator), you are still entitled to royalties just as if you leased to the operator. The leasing company either sold the lease to the operator or has put up the pro rata share of the costs themselves.

Bottom line is this: if you leased your 35 acres at 25% Royalty and there is a producing well you are entitled to 25% of 5.5% (35/640) of the royalty, or a net 1.36% of everything that comes out of the ground - give or take some taxes and costs if applicable.

I doubt the well is currently making 28 mmcf. That was likely where it started, but these wells taper off a good bit. I have royalty in a well in the same area that came on at 18 mmcf in December and is now pretty steady at 6 mmcf a day.