How is the crude oil price determined for royalty purposes? Is it based on an index, if so, what index or is it based in another manner? If your crude is commingled with other peoples crude and half the tank is shipped to one refinery while the other half is shipped to another refinery, what price will your crude be based on?
Charles,
Check your leases. It is generally the well head price received by the operator of the well. If the point of sale is other than the well head, a transportation cost may be deducted depending on the lease terms. You can use index prices to compare to your received price but the index prices will not reflect quality factors applicable to your specific well(s).
Gary:
What index prices are used?
Gary L. Hutchinson said:
Charles,
Check your leases. It is generally the well head price received by the operator of the well. If the point of sale is other than the well head, a transportation cost may be deducted depending on the lease terms. You can use index prices to compare to your received price but the index prices will not reflect quality factors applicable to your specific well(s).
Gary L Hutchinson
Minerals Management
Check the Wall Street Journal. There are many there. The most commonly used is "Cushing Oklahoma" since so many pipelines pass through there. (NYNEX ?) Sometimes refineries will post a price of "Cushing plus or minus" then adjust for sour (h2S) and other impurities. I don't know what oil market posts are published for North Dakota but I'll bet rw reynolds knows.
charles s mallory said:
Gary:
What index prices are used?
Gary L. Hutchinson said:Charles,
Check your leases. It is generally the well head price received by the operator of the well. If the point of sale is other than the well head, a transportation cost may be deducted depending on the lease terms. You can use index prices to compare to your received price but the index prices will not reflect quality factors applicable to your specific well(s).