CAN ANYONE TELL ME IF THE FORMULA FOR FIGURING GAS IS THE SAME AS THE OIL FORMULA? IF IT IS DIFFERENT, DO YOU KNOW HOW TO FIGURE OUT HOW MUCH A GAS PAYMENT IS GOING TO BE. I DO KNOW MY DECIMAL INTEREST, SO THAT HELPS--THANKS TO ALL WHO REPLY--ARDIS
Gas will be sold in increments of MCF (thousand cubic feet). However, often you will hear of a well producing so many millions of cubic feet per day. To convert that to MCF, simply divide by 1000. Your royalty check stub will most likely describe how many MCF were produced during that month. The price received for the gas will vary depending upon the amount of liquids in it, contaminates etc, but look online for gas prices in your area and you will get close enough for a decent approximation. Just multiply the gross number of MCF estimated to be produced per month by your decimal and the assumed price.
Good luck
THANKS FOR YOUR ANSWER, THAT IS EXACTLY WHAT I WANTED TO KNOW. A LOT OF HELP IN THE ANSWER. WE HAVE NOT RECEIVED OUR FIRST OIL OR GAS CHECK AS OF YET, BUT HOPEFULLY WITHIN THE NEXT 3-4 MONTHS. THE WELL WAS PRODUCING 120 MCF FOR I DAY WHEN IT STARTED. THE WELL PRODUCED 15870 BBLS FOR THE MONTH OF MARCH. I HAVE OFTEN WONDERED WHAT PRICE I WILL GET FOR THE GAS, COMPARED TO WHAT THE MARKET PRICE IS–ALSO THE SAME FOR OIL, ANY KNOWLEDGE ON THIS? I KNOW N DAKOTA SPOT PRICE FOR OIL IS APPROX. $20.00 LESS THAN THE EXCHANGE PRICE. I WONDER WHY AND WHAT PRICE WILL I RECEIVE, MAYBE THE N. DAK SPOT PRICE? THANKS --ARDIS
I am not an expert on pricing in N. Dakota for either oil or gas, but here is a link for nationally traded commodities.
http://www.bloomberg.com/markets/commodities/futures/
Usually, oil is priced at some premium or discount to West Texas Intermediate (WTI) depending upon the quality of the oil and transportation costs from the field to the sales point and Gas is priced on a MMBTU basis. (Gas that is rich in liquid hydrocarbons will have a higher BTU count than dry gas) also getting a discount depending upon how far the sales point is unless the lease prohibits this.
Good luck with your wells
Ed
The charges For conditioning gas for sale can be huge, collecting, separating, dehydrating, compressing and probably some I left out along with production tax. If your lease does not expressly forbid you paying any of those costs, I think your value will be quite low. I have a check from 6.9 acres under a well on a 1280. $49,296 dollars gas value, after taxes and charges with a 19% royalty my net share for gas was $42.79 . Pretty underwhelming. I now try to warn people about the charges. I hope you fare better Ms. Jackson.
Dear Ms. Jackson,
You may be paid nothing for natural gas in ND. Much of it is just flared, since there is not much of an infrastructure of gas pipelines in ND. If it is sold, it is sold in MCF, but the price is computed based on BTU. On the royalty check, it should show the BTU adjustment. Then you need to look at your lease form to find out what you agreed to in the way of deductions and transportation costs.
As to oil, looking at futures prices does not good whatsoever, unless you are creating a hedge against future production (like the big boys do). The daily posted price (spot) can be found here:
http://crudeoilpostings.semgroupcorp.com/
You will also note that there are potential deductions for quality. If your average price differs greatly from the SemCrude price, you might want to find out why from the Operator.
Bob is paying about 15.25% for taxes and deducts, based on his numbers.
Then I got curious about severance tax rates in ND, so here is an extract from the ND Gov website:
The gross production tax rate on gas is subject to a price index change on July 1 each year, the rate through June 30, 2011 is $.0914 per mcf. The gross production tax rate on oil is 5% of the gross value and the oil extraction tax rate is 6.5% of the gross value; 4% if the well qualifies for a reduced rate; 2% from qualifying wells in the Bakken formation; and 0% if the well qualifies for an exemption.
As an exercise, it might be revealing to see what severance taxes were actually paid vs what rate of severance tax you were charged. There is a suit in Texas on just this situation, based on rebated tax credits.
r w kennedy said:The charges For conditioning gas for sale can be huge, collecting, separating, dehydrating, compressing and probably some I left out along with production tax. If your lease does not expressly forbid you paying any of those costs, I think your value will be quite low. I have a check from 6.9 acres under a well on a 1280. $49,296 dollars gas value, after taxes and charges with a 19% royalty my net share for gas was $42.79 . Pretty underwhelming. I now try to warn people about the charges. I hope you fare better Ms. Jackson.
Thank you, Buddy. I now know the inportance of fees and taxes. The well I described from above was from 2010 and I don’t think it included tax rebates or incentives. I do in fact have interests in 3 wells drilled in 2008 that I know qualified for a tax incentive on the first 75,000 bbl because they were drilled between July 2007 and June 2008. I think it likely that lessors are not benefitting from this incentive. I would be curious to know if a 1.4 BTU factor means the gas is particularly rich?
1.4 BTU factor is VERY rich.
As far as those peksy incentives that the oil companies get and the royalty owner does not share in, this is from one of my Professional Lease Forms. But first, this is not legal advice. Do not use this clause EVER without consulting a competent oil and gas attorney. If he advises against the use of such a clause, follow his instructions.
Now:
23. It is specifically agreed and understood that Lessor and Lessee shall each bear its proportionate share of production, severance and all other applicable taxes assessable against and attributable to the leasehold and royalty interest created by or reserved in this Lease and actually paid on production from the leased premises or lands pooled therewith; provided, however, that if Lessee applies for and obtains an exemption from or reduction of severance tax on such production, Lessor shall be entitled to its proportionate part of such exemption or reduction. If as a result of any such exemption or reduction of severance tax, Lessee receives a refund (either in the form of a payment or credit against future taxes) for severance taxes previously paid on such production, then Lessee shall reimburse Lessor for its proportionate share of such refund, including any interest thereon.