Hi all..
My 2 siblings and I inhereted about 15 acres of mineral rights and lease to EOG. We were soooo excited...in the beginning....since we've been getting payments (about 6-7 months) they have been decreasing at a rapid pace due to the cost of oil. Those in the know....and who may have been through this before....what are the chances the payments will either stop completely, or start to increase again? Does it allllll depend on the cost per barrel?
In addition to the commodity price fluctuations, the rate of decline on the well would be impacting your payments too. However, if your 15 net acres is spread out over a large enough gross acreage that there is room to drill additional wells, you could see an uptick in your check values as additional wells are brought online. Oil prices have increased in recent weeks, so that will help. Feel free to email me your legal description and I can look on the map and see what is going on in the area around you. [email protected]
Your royalty payments, generally, are based on the amount of production and the price the oil company gets on sale of that oil. There are several different ways for the oil company to determine the price basis used for calculating your royalty payments and the specifics will be set out in your lease. David is correct that if you are in a pooled unit and the company drills additional wells, this may lead to additional royalties. However, with oil prices where they are, they may decide to hold off on drilling new wells due to the cost of drilling, especially if it would involve fracking.
.....But, I read a recent article that said there are at least 1400 new wells in the EF Shale play that have already been drilled but not fracked, because of the drop in ppb. When (if) the spot price rises to a profitable level, and there is sufficient demand for the oil, these wells will be finished and put into production. Here's the link to that report:
http://click2.oxfordclub.com/v/CQ/CGQ/CrA/AC-9SA/k4I/AA/AA/cFq5
I also noticed in my most recent royalty detail statement that the ppb the producer was using as a multiplier , $40.96/bbl, was considerably under the average spot price for WTI crude over the past month. I wrote them (Marathon) a note asking for an explanation. Here was their reply:
"$40.96/bbl was the price for sales to Flint Hills in March 2015......Oil prices are often revised in the month following production. The prices are based on the proceeds of the sale, in this case to Flint Hills, not the WTI spot price."
YES MAM, The oil price does make a difference in your check.
Welcome to the forum Robyn. Don't get too excited. Where is your acreage?
Robyn, are you familiar with the Railroad Commission of Texas website?
Hi Robyn - I have been in this Dimmit County 'dice roll' since 1981 - I have learned the hard way...'don't count your chickens before they hatch' - I have leased to at least 6 different companies w/in that timeframe...I have 40 stand alone acres and 10 acres in Brundage Township... I and my family made our $$ on the initial lease payment...pooling was a low, low ball payout for us esp w/Brundage...over 30 folks in that itty bitty pool - all other leased never heard back... I am now waiting for an oil company's seized leases, which was one of ours for 30 acres to come out of bankruptcy courts...it has been there now, for over 4 yrs! Total standstill there... right now, I am asking this forum - if anyone knows, if or when Gambit Oil's seized leases will or have been released...
Also, from years of experience - I have concluded - #1 hire an attorney to go over the lease - they are always written towards the advantage of the oil company #2 avoid fracking or pooling situations.
Because the newest discovered oil reservoir 'The Buda" in under our acreages and does Not need to be fracked...just pure & clean 'Texas Tea' oil (which btw, is the Gold Standard for oil purity and quality) I will ask only for VERTICAL wells to be drilled. Because of the location w/in The Bermuda Colony opens up far toooo many folks participating (thus reducing revenues). Whether companies will accept that is their problem not mine...I am more than 'twice burned' - frankly, and walk into any more negotiations with my eye wide opened & my attorney by my side.
It is a very brutal game out there now...and Lessees be forewarned - to educate yourselves...gets more so with each passing year.
With that said, there Are some very helpful folks, who know all the info re: our acres and the probable productivity to a "T" - and I thank them all. It has made this tedious process more understable.
Jayne Burgin Stokes