Hello to all Landmen; Based on a 640 acre pool my interest is .003906
Please help me understand... Trying to get a realistic understanding of an oil mineral lease royalty value per barrel,
as an expression of percentage, net profit VS. production costs, storage and transportation.
The landman has been telling me,
Scenerio 1: non-working interest as follows
1 barrel of oil selling for $100 with an average 10% costs for production storage & transportation, leaving 90% net profit;
with 25% of net profit in royalties equals $22.50 to our pool.
Now I have talked to other people, who tell me the norm. hypothetically
1 barrel of oil selling for $100 average 70% costs of production, storage, and transportation leaving 30% net profit at 25% of net profit in royalties equals $7.50 to our pool.
Now, I understand everything in oil exploration is a gamble, I am sure there are no two wells that have the exact same costs involved; but specifically in the Eagle Ford Shale Play in La Salle County, TX abstract A-585, there must be some average window of costs per barrel to calculate net profits per barrel as to get a ballpark value of the royalties assuming
an average well producing 400 barrels per day on a yearly average (I understand the production decline curve).
Bottom line in my personal situation the landman is tapping out numbers of around $5,000.00 per month for my share of the pool.
People I have talked to with my personal situation are estimating $300-400.00 per month in royalties, that is a huge spread? And, I am asking any body with any real experience what tends to be the production, storage, and transportation costs expressed in a percentage. Thank you very much,
p.s. here's the latest deal on my table $750-3 yr/$750-2 yr ext. with 25% royalty. Let's help each other as much as possible.