Anyone have a ballpark estimate of the income from a quarter royalty on an average producing gas well, 640 mineral acres in Reeves County? Thanks,
Dan
If you own 100 percent of the minerals, and the well is producing about 15,000 mcf per day, then about $100,000/mo. Can vary widely either way.
Thank you. Gives me some idea.
Wade, help me on the math. That example of a well yielding royalties of about 100,000/mo. from a gas well producing 15,000 mcf per day if the royalty owner has 100% of the minerals and a 25% royalty lease seems to say the gas was being sold for about .88 per mcf, right?
A lot of gas wells are shut-in or being flared in Reeves right now. Is that $.88/mcf some kind of effective average price?
I wonder if a better example of that “average producing gas well” Dan was wondering about might be a gas well making around 3,000 to 5,000 mcf/day but with the gas being sold for $2.50/mcf in which case the monthly royalty would be $56,000 to $94,000/month.
Waha prices have been below a dollar recently. As for production rates, anyone’s guess.
Thank you both for your reply. In speaking with an Apache representative, unless I misunderstood him (which is possible), in answer to my question about the sales costs for gas and what we could expect to net, he ball-parked the expense at $.75 per mcf. That seems at odds with your comments. Besides the sales of gas, there are also sales of distilled liquids which he indicated were “very valuable”. How does that figure into the net? I do realize that the volume of gas pruduced can range significantly, but I was curious about what an average well produces. Didn’t mention it before but we will be part of a pooled unit, actually two, with the supposedly multiple wells in each unit since part of the other land in the unit is mineral classified (State requires more wells).
Oh, also Wade, what are Waha prices? A Waha is a natural gas pipeline junction, right? Tried to find an explanation online but it appears just to be a price point for natural gas in the world.
Correct. Where most of Permian gas goes through.
Trying to guess what your check would be based on limited information is truly a guess. Some of the factors you mention here could cut it substantially. Assume every check you get will be the biggest one for the rest of the well, and you should be okay.
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Wade: I think our operator has cut production because of the low price for gas. would that be a possibility??
Dan
Your later comments indicate you weren’t really looking for production from a “gas well”, that’s a designation made based on the gas volume versus the amount of condensate a well produces, but are wanting to know what the typical horizontal well in Reeves County produces so you could apply that to to some specific Apache acreage.
To see what some average numbers might look like I checked the completion reports filed with RRC since 1/1/19 on new Reeves wells. I only looked at reports that covered 1H wells, the first wells drilled in a unit. A lot of those were filed as “well record only”, meaning no test results were shown, but on 23 wells where the volumes from 24 or 48 hour completion test were reported the highest gas volume was 8,159 mcf/day and highest condensate 5,657 BPD. The averages for those 23 was about 4,500 mcf/day and 1,350 barrels/day of condensate.
Looking at only 2 1/2 months and 23 wells is too small a sample to be meaningful, and completion test numbers aren’t as good an indicator of any wells capability as the first 30 or 90 days production would be. Those 23 included some wells with laterals that were less than a mile long and others where the horizontal leg extended through two sections for 8,000 to 10,000’.
Instead of using any sort of average to project what wells might produce on your acreage you should look at what wells in your same area have produced over a number of months, and if necessary adjust those volumes for difference in their lateral length versus what is anticipated on your acreage.
Yes. The pipeline constraints are supposed to ease later this year and is possible they could be choking back the well. Gas wells also tail off pretty hard after the first few months in some areas.
Thanks Dusty. I appreciate all the information and suggestions. Pretty sure I am tilting at windmills at this point, especially with the market factors.
Thanks for the help Wade. It really is a guess.
Hi Dan, to affirm Wade, Waha is the major pricing index for gas produced in that region. It acts as the closest approximation for the value of gas produced in west Texas. For April 2019-October 2019, its average price is in the sub $1.10 range, for November19-March20, its average price is in the low $2.XX, however these prices are changing constantly. If there are nat. gas liquids, these will be priced at a completely different pricing hub (generally a differential from mont belvieu or conway). However, these are not the prices you should expect to net on your royalty check, as leases can include “market enhancement clauses”, which says the costs to gather/transport/process the gas/ngl/oil from the well can be deducted. So while NGLs can substantially increase the revenue of the well, the costs associated with selling the wells production will also increase, as NGLs have to go through additional processing facilities in order to sell them.
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Thank you ARC! I appreciate the help. I think what I am finding are the outer limits of what income could be at one point in time with one set of facts.