I own minerals in Sections 7, 3 and 8 of Block A-32 PSL, Andrews County, TX. I’m specifically interested in the Fullerton Clearfork Unit, TR 014, operated by XTO, of which I currently receive royalties. This unit has produced generously for many years, but production sharply fell off the past few months. Can anyone explain why? XTO royalty owner relations offers no help.
I cannot speak to that area is particular, but several options come to mind. One might be fracking nearby and shutting in wells to protect them from the pressure hit. Another might be mechanical maintenance. The biggie is the price of gas is very low right now and in certain parts of the Permian Basin it is going “negative” due to take away capacity or the lack thereof, so some companies are curtailing their production until those two bottlenecks are relieved. Also, there is just normal decline combined with low gas prices and that leads to low royalties.
1 Like
Thank you for your input. These are older horizontal wells, many of which have produced since the 1940’s. I continuously receive offers of purchase from brokers, but the offered price has decreased over the past four years. Many seniors, me included, counted on their royalties to supplement their retirement, but it seems were quickly outliving our investments.
If you have a lot of gas in your royalty volumes, the price of gas is expected to increase in 2025-6 as the new trains of LNG export terminals come online. That may help on the royalty side. And eventually on the exploration side as the supply and demand balance out.
Lease production has historically been much heavier on oil side than gas. I’ve seen periodic reductions in monthly royalty payments, which as you indicated were the result of maintenance, but this time began with a sharp fall during summer 2023 and has had rises and falls since. February’s production is the lowest I’ve seen since I acquired the interest in 1983.
I have not read the Fullerton Clearfork Unit agreement, so this is a general comment based upon my unit knowledge in OK, so caveat there. The Fullerton Clearfork Unit has about 2500 wells in it. You are probably getting paid on the all of the active wells based upon your net acres in your sections as a net amount against the gross amount in the unit. The horizontal well in sec 8 actually stopped production in 2019. The one nearby in sec 9 stopped in 2018. There many hundreds of vertical wells in the unit. It could be that the operator has been shutting in some of the non-economic wells more recently. The earliest wells were back in 1913! Quite a few new wells were drilled in 2022 and one was completed in Jan 2024. It looks like a bit less than 600 wells were still online as of 1/1/24. Declines in production like this are normal. Gas prices dropped in early 2023, so that is why you saw a drop a few months later. I sure hope they go back up to $4.00 in the next two years!
Ol prices came off of their 2022 high and are hovering near 75-83 or so.
Since you are getting offers, that is encouraging. Blk 14 to the east of you has 10 new horizontals permitted, so that might be a good sign. Ring Energy is their operator.
I’m sorry, I said these are horizontal wells. That’s incorrect; they are vertical wells. XTO is the operator.