If you are in a pool of twelve people and 400+ acres, what constitutes 1/5royalty? I was told
it means you receive every fifth barrel of oil produced...If each of the 12 pooled persons
receives 1/5, how does that make sense? I am certain the person who owns the
land that is being drilled on receives a large percentage so how are the other 12
pooled people determined? I am getting the above info from nonprofessionals
in the area. Can you actually build a pad on six acres? Does that include the
equipment, offices, etc. that accompany the actual pad or are those on additional acreage?
Second question- is there a benefit to having smaller (400+) acreage than (600+)
acreage in a pool? Thanks for any info...
First, the well is drilled in a spacing unit containing XXX acres. You, as a mineral owner owns XXX net mineral acres. Your % of the spacing unit would be (your net mineral acres divided by the total spacing unit acreage). Your lease reflects the % royalty you will recieve. A drilling pad can be built on little acreage (much less than 6 acres). The drilling pad includes the equipment/housing (trailers usually), drill pit to the side. Again, much less than 6 acres required. You may have an access road to the location that extends thru several acres but doesn't include the drilling pad.
First you need to divide the total acreage owned into the twelve owners. To simplify the calculations lets say the 12 own 480 acres of interest.
480/12 = 40 acres per person.
Now you need to divde the 40 acres per person into the drill spacing (Pool) 1280 acre spacing is common.
40/1280 = .03125 (3.125% of the Pool)
The final step is to multiply that percentage by your royalty percentage of 1/5 (20%)
.03125X.20 = .00625 (Royalty per barrel)
Multiply your royalty per barrel by the price it sells for to get your dollars/cents per barrel.
$100.00x.0625 = 62.5 cents per barrel per person.
For the 12, the oil company is paying out $7.50 per barrel in this example.
62.5 cents per barrel does not sound like much, but a well producing 5000 barrels a month would gross $3,125.00 per month!
Dorthy, the best way I can address what seems to be baffling you is that if you have 1/5th royalty that the operator gets 80% of everything and all the people who leased combined divide up the other 20%.
You stated that the land owner could get some. Unless he is the mineral owner, he may not get anything except money for the pad/damage. I think Donald did a good job explaining it.
Thanks to all of you for the great information...As is apparently obvious to you, I am still learning
about this Eagle Ford Shale exploration and I enjoy every tidbit of info I receive. Thanks for taking
the time to respond to my "amateur" questions. I really appreciate this forum.
No one is an amateur, we all started somewhere. Some have just been in the business longer and have learned a lot the hard way. Some of us where lucky enough to have parents that gave us the opportunity to learn about the business. I am glad that this forum was started as we all help each other and everyone is learning from each other. If you have any question, I'm sure someone will be able to answer them or at least point you to the right place for answers.