Hi, We own an oil lease in the Hansen Kullin Unit run by EOG. We’ve seen a reduction in royalties over the past year or two. I read an article that EOG is looking at other areas outside of Eagleford as it is not performing. Does anyone have any insight or knowledge if output and royalties will pick up again? Phil
Hey Mr. Clark,
I ran out that unit, the Hansen Kullin Unit is pretty well drilled up, there isn’t much room for any upside on more drilling as there are 10 wells producing on the unit. 9 Eagleford Wells and 1 Austin Chaulk, through out the life of a well you are going to see royalties trickle down as wells become less productive. So I wouldn’t count on your output levels going back up, as for royalties the only fluctuation you will probably see will be based on Oil prices going up. Though this last week has not been fun for the market. -Jeremy
Hi, I own an oil lease in the Whyburn Unit run by EOG. We’ve seen a reduction in royalties over the past year or two. Does anyone have any insight or knowledge if output and royalties will pick up again?
Fields and wells normally decline over time, so volumes will decrease. The royalties are paid on the volumes at the prevailing price when the products are sold. If they do more drilling, then you may get an increase. Not much happening until the supply and demand even out again.
EOG is a good operator to have running your lease in Eagle Ford. Eagle Ford is one of their biggest assets, they consider it still in “growth” mode (looks like three rigs planned to be running on average in 2020), and they’ve been trialing enhanced oil recovery methods with good success reported in that basin (which can revive older wells). That said, they’re likely developing things in projects, rather than scattered across all their acreage since that’s more efficient, so it’ll depend on if they have any project on YOUR acreage and what priority it is for timing. Hard to say without knowing their plans in detail, and they don’t disclose that (usually). They’re currently drilling down in Karnes county.
The Whyburn Unit wells are on average around 8 years old, the reason you have not seen increased production in the unit is because the wells were just ok when they came on. They Averaged around 12,000 bbl a month at the time they were brought online, and the decline curve was pretty steady. With several areas of the Eagleford EOG owns doing 20-26,000 bbl a month in the front months, these areas that are held by current low production will not be the first ones they begin drilling. While there is PUD available in the Whyburn economically its not going to be the initial target for new wells. We have owned in the Whyburn in the past and I would be happy to answer any questions you have if you would like to reach out to me. Hope you have a good Day and that I was of some help! -Jeremy