Are Condensates Paid at same rate of Crude Oil

Can anyone help me with this!

My land is producing condensates in large numbers. Crude Oil never shows up on my royalty checks. When i call my oil company they tell me that the land is producing oil in very large numbers. When i look at the RRC site i can see thethe properties next to mine have wells that are labeled as Oil Wells. Mine are labeled as gas wells. I understand that condensates are a type of lite oil but very confused how condensates pay out the same as the current price of crude oil.

Is it standard practice for the lease income to stop after wells are drilled on your property. It seems that the Oil Company should still have to lease the property in order to drill on it.

You only get one bonus payment at the time of leasing (in most cases). Once a producing well is drilled, the lease remains in effect according to the terms of the lease-often for as long as there is production. The royalties that you receive are the payments instead. If you see West Texas Intermediate prices, that is only a guide for a particular grade of oil. The wells near you may be in a different reservoir than yours-hence a different designation as “oil” versus “gas”.

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Dirk- In answer to your direct question, condensates are paid on a per gallon basis and are generally more valuable than oil because less refining is required to turn those into all the different kinds of products that can be produced from it.

Designations for oil wells vs gas wells are determined by what is called at Gas to Oil Ratio, or GOR. Standard procedure is if the GOR is over 6,000 cubic feet per barrel, it is a gas well. If the GOR is less than that number, it is classified as an oil well.

Scientifically speaking, condensates are not oil as they are a byproduct of natural gas, even though you and I see condensates as a liquid so we associate them with oil. That is why there are different pricing variables to all three.

Hopes this helps.

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The RRC field rules do not necessarily adhere to statutory definition of an oil well versus a gas well. For example, an operator has the option of designating a well as either an oil well or a gas well if it is completed in the Phantom (Wolfcamp) field which covers multiple counties. All wells completed in the Ford, West (Wolfcamp) field are classified as gas wells, regardless as to the relative volumes of gas and oil produced. If a horizontal well is classified as a gas well, then it usually qualifies for a reduced severance tax rate on the gas and products as a high-cost gas well. Many operators in Reeves, Loving and Ward counties are filing to reclassify oil wells as gas wells to take advantage of this savings. Therefore, the “condensate” on your check is most likely oil and the price should be the same as oil from other oil wells. On the other hand, Apache’s wells are all in other formations and truly gas wells. If you identify the well (name, api number, RRC lease number, operator), then you can get a more definite answer.

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Todd, I agree with everything you said except the statement that “condensates are paid on a per gallon basis…”. Think you are confusing condensate with natural gas liquids, the products like ethane, propane and butane that are produced when the raw natural gas is run though a gas processing plant. Those products are priced by the gallon

Condensate sales as reported on the State Comptroller’s website (CONG) is priced per barrel like crude oil. Condensate has higher API gravity than most grades of crude oil but the main distinction is it is produced by gas wells rather than oil wells.

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Some checks will list manu condensate in gallons which is processed out of the gas in the plant with other liquids. This is not the same as other condensate and is priced differently. One way to see the difference is to look at the severance tax rate. In Texas, condensate, like oil, is taxes at 4.6% severance tax. The manu condensate will have a 7.5% sev tax rate, like the gas and other liquids. This may be handled differently in other states.

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TD Thanks so much for all the comments and info you bring to the Forum. I still had room for confusion , so i read an article from reuters.com/article/us-oil-condensate. Seems there has been conflicting conversations on how to name each in order to sell them fairly. My concern is how is plant products content in natural gas measured without passing it through a processing facility ? There is no plant at the wellhead to do that. Is there some kind of instrument to calculate liquid content of gas similar to the rubicons of long ago that monitored gas quality at the tailgate? Thanks again for all you contribute the forum. CharlesJ

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Gas is periodically tested or assessed for before entering big pipeline where it is commingled with other gas for transportation to the processing plant. Operator needs to know whether the the gas is dry (plain gas) or wet gas (contains liquids which are separated at the processing plant and sold separately for remaining dry gas). Generally the severed products are more valuable than the plain gas. All gas goes to a plant where it is processed. The question is where it is sold - at the wellhead or at the plant after transporting and processing. The liquid products are ethane, propane, butane, iso-propane, and gasoline - percentages vary and most operators combine and average value based on volumes in gallons. Some manu condensate can be produced, and is not the same as condensate from a true gas well. As RRC field rules are now mixing up oil and gas wells, you need to look at completion reports to see gas/oil ratio to see how well would be defined under statutory rules. That and the oil gravity will give you a better idea as to whether it is really oil or condensate. Some expert on this forum will be able to give you a more coherent explanation of this complicated area. Keep reading and researching.

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Speaking of condensates - I have noticed that on our pooled well the first check we got listed condensates. No other check lists it. Since that time it lists breakdown of gas, oil and plant products, but no more condensates. Is this common or not? Why would that occur? Just curious…

165:10-13-2. Classification of wells for allowable purposes (a) For purposes of this Subchapter the terms gas, oil, and gas-oil ratio are defined in 165:10-1-2. (b) Any well having a gas-oil ratio of 15,000 to one or more shall be classified as a gas well for allowable purposes. © Any well having a gas-oil ratio of less than 15,000 to one shall be classified as an oil well for allowable purposes.

Check the completion report at the Corp. Commission and see how it was classified. You can review the well’s production being reported by purchasers at the Tax Commission.

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Be aware that RRC has the authority under Chapter 86 of the Texas Natural Resources Code to override this ratio for regulatory purposes and classify what would be oil wells as gas wells. See the field rules for Ford, West (Wolfcamp) field which provides that all wells are gas wells and Phantom (Wolfcamp) field which allows operators to elect for each well to be an oil or a gas well. This does not change the statutory ratio which would otherwise classify the wells as oil wells. It just means that the RRC has set a different ratio for purposes of RRC leases.

Will the RRC notify those lease owners which are under Chapter 86 of the TNRC and being changed prior to the change and subject to Challenge?