Money Operator selling crude?

#1

First some info. Grimes county, Madisonville woodbine formation, 2011 drilled.

When the well first started it was like clock work on getting paid close to Brent or Light La crude. Operator merged with another company last year and pricing started to fall towards the WTI. Brent /WTI shrunk so no big deal. But last check for 3/2015 production has the crude at 44.87 and 01/2015 was at 44.50. Looking at WTI history I really see it touching those marks maybe once in the month with most well above that mark. And both months WELL below brent spot price.

My Question is how does the company set the price and how can I verify that they are selling it at said price ? Well produces about 1000 bbls a month so not a once a month type deal. Can I find out from them who they are selling it too? Just need direction please

#2

The price is set by the refiners who buy the crude oil. They issue publications (usually monthly) called a "Crude Oil Price Bulletin" which sets forth the price per barrel they are willing to pay for each type and gravity of crude oil. Each crude oil per barrel price quoted in the price bulletin is going to be somewhat lower than the futures prices for near-month delivery on the spot market.

If you wanted to buy the right to acquire 10,000 bbls of WTI for July delivery (as opposed to taking delivery in 60, 90 or 120 days, for instance), as of yesterday (June 2), it would have cost you $61.26/bbl, assuming you bought your contract at the close of business. If you had a truckload of crude to sell and you offered it to Valero Refining, for instance, as of June 2, 2015, Valero's posted price for WTI, Gravity Adjustment A, was $57.75/bbl, and that is the price Valero would have paid you on that day.

In other words, your operator is not getting the futures price you see quoted on CNBC or Bloomberg. He's usually getting a few dollars per barrel less than the futures price. The spot price for Brent crude reflects upward price pressure exerted by buyers in Europe, pressures which haven't been present in the U.S. market for quite some time now. The comparison between WTI and Brent futures prices is of limited utility; the Valero price bulletin doesn't quote any price for Brent, probably because nobody is going to be driving a truckload of Brent up to a Valero terminal.

#3

Great info and back when it started they way they explained it was it was sweet crude and closer to Brent in quality. I think thats the way it was. I would lie but I think API was 42 or 43 range and maybe as well produced the API has decreased and getting a lower price for that alone. Will look up that data and keep tract . thanks!!

#4

It may be that the crude oil produced from your well is similar in quality and gravity to Brent, but I doubt that your operator would actually get the Brent price for it. (He'd have to be selling it in Europe to get that price.) I'm not sure what crude type Woodbine production in Madison County equates to on the attached price bulletin, but my guess would be that it would fetch the same price as WTI.

Grimes county said:

Great info and back when it started they way they explained it was it was sweet crude and closer to Brent in quality. I think thats the way it was. I would lie but I think API was 42 or 43 range and maybe as well produced the API has decreased and getting a lower price for that alone. Will look up that data and keep tract . thanks!!

1142-1506CrudePriceBulletin.pdf (37 KB)
#5

Yep already got on Valero website on price bulletin. Will be tracking it to see which one it follows . I think they sell to Sunoco so will see if they have the same price bulletin.. The valero gives it to me in a daily format for a month for several grades!! I got the info and again thanks !!

#6

If it's any comfort, the May production runs should reflect prices well north of $45/bbl. Valero's posted prices ranged from $54 to $57.50/bbl for the month of May, 2015, and I would expect that your royalty checks should show some improvement over previous months.

#7

Correct I saw the same $10 jump. Got on sunoco and rough look they are not paying anywhere close to Valero. Saw alot of 30's on the Sunoco daily thing from march. Will do some more research and see what I can use as a new estimation in the future. They have plans to drill 4 more wells on my lease so I want to do all the leg work to understand how they get paid. Just real strange about after merger it almost seemed like they changed the way they were selling it. But I now have the tools to research what actually happened. Just need time to do it now

#8

Since I don't personally have any operating wells or production at this point in time, I've never tried to dig out this information before; but, this is excellent information and it is great to be able to have an idea what to expect. As always, it is interesting to see the footnotes. With that said, is there any way to pull up the crude category and gravity of a specific well? I would just like to see what the crude or crude's in my area are rated.

Thanks for doing our homework!



P. R. Kabella said:

It may be that the crude oil produced from your well is similar in quality and gravity to Brent, but I doubt that your operator would actually get the Brent price for it. (He'd have to be selling it in Europe to get that price.) I'm not sure what crude type Woodbine production in Madison County equates to on the attached price bulletin, but my guess would be that it would fetch the same price as WTI.

Grimes county said:

Great info and back when it started they way they explained it was it was sweet crude and closer to Brent in quality. I think thats the way it was. I would lie but I think API was 42 or 43 range and maybe as well produced the API has decreased and getting a lower price for that alone. Will look up that data and keep tract . thanks!!

#9

In Texas I know well completion reports will have the API gravity number on it. Dont know how long it stays at that or it changes and well gets older. I know the state probably has laws all over the place that they cant steal ( by not reporting sales in proper manner) from me but I am a detailed person and want to know why something happens the way it happens and Kabella gave me a wealth of information to do just that!

#10

Thanks for the feedback and I ditto your philosophy. Now that the issue is front and center, I will do some digging.

Grimes county said:

In Texas I know well completion reports will have the API gravity number on it. Dont know how long it stays at that or it changes and well gets older. I know the state probably has laws all over the place that they cant steal ( by not reporting sales in proper manner) from me but I am a detailed person and want to know why something happens the way it happens and Kabella gave me a wealth of information to do just that!

closed #11