We (those in our lease) just received forms from Phillips 66, requesting personal info required to start sending us royalty checks. So, obviously drilling had started without us knowing anything about it. The monthly production reports show about 4,600 barrels of oil in Dec (900) and Jan (3700). My questions are: Does this mean that drilling is completed? Or does drilling sometimes continue, even after production has begun? Is the second months initial production of 3700 barrels an indication that we should not expect any higher production in the future? Additionally, when you read the west Texas oil is, for example, $92/barrel, is that the price upon which your royalty payments are based? Any information is greatly appreciated. Thanks to all for your time and expertise.
Ray: Generally, they won't tell you when drilling starts or stops. But once they start producing, they are not still drilling on that particular well. ( They may drill another well on the lease) If they get oil and/or gas they will send you a division order and Form W-9 to sign and return. The division order will specify the percentage of production you will receive which is based on your ownership percentage of the total lease acreage and multiplied by the royalty percentage you agreed to in the lease. If you negotiated a "cost free" royalty in the lease then, in your example, your royalty would be based on approximately $92/barrel. ( I say "approximately" because there is also a clause in your lease which determines how the price is computed) If you did not, and the lease provides that you will pay a percentage of the post production costs (usually described as gathering, marketing, storing, treating, compressing, transporting etc), then you will receive a lessor amount. Actual production may vary, month to month, based on many factors. Don't expect it to be consistent. This is a very general answer
Thanks George. Much appreciated. It is a horizontal well, which I failed to mention. And I saw an article that I understood to say that in some cases they are able to keep drilling even after production has started. At least that it what I thought it said. So, I guess I was just trying to get clarification on that point. Again, thanks much.
These are the production reports that we have to date for Dec13 thru Feb14. The gas is still being flared... hope that will be rectified soon. Noticed that Forge Energy, in their other leases, has a history of drilling additional horizontal wells after success in the first... hoping for them to do the same here. Sure appreciate all comments in the past, which I am passing along to kinfolks in the same lease.