Anyone have experience with getting paid royalties on an area of a single family home?
I saw someone mention $20 a month. Is that right? If so, I’m wondering how it makes sense at all to have a lawyer look at the deal.
Mr. Skaggs,
Monthly royalty income is based on:
Net Mineral Acres contributed to the unit, Acres in unit, Royalty percentage on lease, Deductions from royalty, Sales, Sales Price, and Decline.
For example, if a lot was 0.8 acres, 1/4 royalty (no deductions), 350 acre unit, 5mmcfpd (sales) at $5.00, then the lot owner could expect an initial revenue of (.8/350)x5000x5.00x.25=$14.28 per day.
As to the shale areas, the decline curve is very steep. You can expect a decline in production of 85% in the first year, so 5mmcfpd in a year would diminish to .75mmcfpd after a year.
The only way that shale plays makes sense to operators is that the flush production comes so quickly. (Flush production is the production required to get your money back)
Thank you for this info.
My initial calculations show that I could conservatively expect $2.00 to $3.00 a day max, declining to $0.35 a day after a year.
While $60-$90 a month is useful, it’s likely the cost of a lawyer to review this will consume a good portion of the revenue.