I have a royalty interest of .00173611 on land in Montgomery County, Texas. Denbury is the operator and I have received a royalty check for $0.61 covering activity from September of 2013 thru February of 2015.
this does not seem economical and only seems to allow the oil company to retain acreage.
Should I do anything, should I bother to cash the check?
I would ask an attorney but I feel certain that the cost benefit analysis would fail to support the question. thanks for you help.
Even though you share is small, there are some other important items to consider. What is the total production on the lease, and how many acres is the lease? How many wells are there?
Received $0.61 on a royalty of 0.00173611. I compute gross production value for the well over that time as $351 computed as $0.61 /.00173611 (18 months of production). Am i missing something or is this clearly uneconomical and thus simply showing production to hold acreage?
William: Is your interest in the Conroe Field? Has the Conroe Field been unitized? Denbury has planned a CO2 Flood for the Conroe Field in a couple of years. However, with the oil downturn and lower prices this may have delayed their plans. If you want more info on this you may want to access Denbury's web site and read there operational plans for the future. In any case I would want to hold on to my mineral/royalty interests in this area.
State law requires royalty payments at least once per year, but companies can wait until at least $25 is accumulated. Many division orders put the minimum at $100.
Wade,
Don't wells have to produce in paying quantities in Texas and hasn't Texas developed a formula for calculating paying quantities over a 6 to 17 month period? The formula requires certain charges and expenses to be deducted from the well’s revenue. If the resulting figure is negative, the well is not producing in paying quantities. If there is more than one well in the lease, the paying-quantities test applies to all the lease wells as a whole and not separately to individual wells. The expenses deductible from revenue include royalty payments, administrative and overhead charges traceable to producing and marketing of the production, treating and transportation charges, charges for labor and repairs, depreciation of salvageable production equipment, expenses for installing pipeline facilities, electric bills for production operations and taxes. Nondeductible expenses include the original costs of drilling, completing and equipping the well, reworking expenses,depreciation of original investment and overriding royalties.
Bloomberg shows west Texas Intermediate at $49.14 this morning. Natural gas is at $2.71. Then your share will be reduced by all of the charges the company makes you pay.
You should be thankful they are not working your wells.
You need that stuff to come up when the price is much improved. When will that happen? Well, we don't really know. The shale revolution has shown that peak oil was just another mistake.
The people of the Middle East finally have what they have always wanted for hundreds of years, a chance to kill each other.
The Middle East is a very volatile place. What ever happens, it will not be good. If Iran and Saudi Arabia go to war, The price of the product and US production will increase. The same will happen if the Sunni and Shia decide to murder each other.
They seem to be doing a good job of that now.
If Israel takes on Iran, the price of the product will go up.
It is a terrible way to improve our royalties, but I suspect that is the way it will go. Hang in there.
I think no matter what the price of oil and gas is it will not affect his royalties enough to matter, no matter how high they go. Even if oil and gas quadruples he'd only make like $2 a year. It's more likely that oil will get cheaper when Iran starts flooding the market with oil once they lift sanctions. I'd be trying to get them to plug the well(s), develop the field and drill or get the well(s) producing in paying quantities.
I hope you find the answer to your question. I have a similar very small interest, only ours pays about $70 a year. More than yours but still not anything to rejoice over. It has been that way for many years. I firmly believe that they are pumping just enough to keep it in production and hold the lease for future opportunities. Sounds like a $0.61 check for 18 months is not a paying quantity. I'm sure they know all the loopholes to hold your mineral rights until it benefits them. :(
Mineral Joe- Lease language can affect the answer to your question, but yes, in general, a lease is supposed to be producing in paying quantities, according to what a reasonably prudent operator would do. It is not strictly a question of income versus expenses.
William I will say this much. I have a family friend with a situation similar to yours. The operator is only producing a few barrels a year (in an effort to just maintain the lease and all of the tanks and equipment on it). What I found out is that the same operator owns the minerals on a lease next to my friends. They are pumping away on it 1000x more than my friends lease. They are using the land on my friends lease for all of their tank batteries. What incentive does the operator have to work my friends lease, when they can pump (and drain) the reservoir from the next lease over that they own all of the minerals on and no one has ever said a word to them about it? You might check neighboring leases and see what their production is. My family friend is well aware of this situation I have described above, but unfortunately there are more than 30 heirs, and most of them refuse to talk to each other, so no one is doing anything about it.
What kind of interest do you have in the Conroe unit? I can speak personally for Denbury and assure you that the unit is producing in paying quantities. Keep in mind that the unit encompasses several thousands of acres and there are many wells that contribute to the unit. This is not a matter of “holding” acreage as the other comments have implied. If you have a relatively small decimal in only (1?) tract within the unit… If the tract that you are in has a very small tract participation factor compared to other tracts in the unit (meaning that it contributes less production to the unit as a whole) then that would result in a smaller portion of the production too. Your check shows gross production for the TRACT, not the unit. They take total unit production, then apply the unit production to the tract participation table to show the gross production for the tract. Then, your NRI is multiplied by that gross tract production, less other post production costs and taxes.
This unit has been producing for decades and is depleted. Denbury has plans to CO2 flood the unit with the hope of recovering 10% or more of the original oil in place which wouldn’t be recoverable through traditional drilling techniques. Even if your checks are small, how would you benefit from them shutting in the wells and/or ending operations? If your minerals are depleted then it’s unlikely someone will come in behind them and top lease you or pay you for your minerals. I would research Denbury and be excited that they have targeted your area as a potentially viable field for tertiary recovery.
There are also NPI (net profit interest) owners in the Conroe field. If you are a NPI owner, then your small payment would be understandable given the price of oil right now. Companies are struggling to profit from operations.