WTI price VS what oil company paid royalties on

Oil and Gas Leasing Help
1

Can someone please explain why our royalties paid from oil sold on June 18, 2018 where based on $57 a barrel when WTI was selling for approx. $71 a barrel. I looked at our contract and we should be getting royalties on gross not any expenses- processing, transportation etc.

Does WTI sell for different prices in different fields etc.?

Thanks,

2

I’ll try to explain this to you without getting to technical. The common reason right now for the discount in price is the lack of pipeline capacity. Without anyway to get the oil to Cushing, OK (what the price of WTI is based on), the company just sells it for what they can get it for. You can see this in the widening of the spread between Midland WTI and WTI (spread is the difference between the two pricing points). If your operator is a publicly traded company, you will see that this is an issue they spend a lot of time talking about in their quarterly earinings. Hope this helps

3

Oil prices have become very complex in the Permian. If your operator has not hedged its oil and is selling as picked up, then it will not receive WTI posted price. The settlement price hit was around $9 in June, dropped back to $8+ in July and is $13.40 in August. That does not include transportation to delivery hub such as Midland. Smaller Operators are weighing whether to hedge a negative $10 for all of 2019 or sell at market and hope it averages to less. Once pipeline capacity opens up, prices will I,prove.

4

“…With benchmark WTI trading in the upper-$60s, Permian producers that have not secured pipeline space or hedged their production are selling oil in the mid- to low-$50s. That discount should worsen over the next year until new pipelines come online.”

5

Our contract with the oil company specifically says that they will bear the costs of transportation and processing etc. Should we have our lawyers look into this matter? thanks

6

Not worth it. 99% of all oil companies aren’t able to realize the WTI price because of their proximity to the hub. Trust me if the could get a higher price for their oil & natural gas they would. It’s just the way they have managed the marketing of their production.

7

One thing not mentioned is the type of crude that is actually being produced. It is condensate? what is the specific gravity? Enough sulfur to classify it as sour?

Look at this chart and be sure to read the last page.

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8

Our contract with the oil company says that they will bear the costs of transportation and processing etc. Should we have our lawyers look into this matter? thanks

9

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