I have recently signed a lease in sw wyoming, and am new to the oil/gas business. Could someone give me an idea of royalty payment amounts. For example, what is the typical value of a barrel of oil sold at the wellhead and what then is a typical amount of royalty paid per barrel. For example, if one barrel is priced at the wellhead at $40.00, is the 3/16 royalty amount paid based on the $40.00, or are there expenses/taxes/etc. subtracted first? I am trying to arrive at a typical amount of royalty paid per barrel based on a 3/16 royalty rate. Thanks Don
Donald:
The royalty payment will be based on the current price of oil (which varies) and the amount of mineral acres you own plus the % royalty in your lease. The operator will hold out some taxes (serverence, etc.), then you will pay taxes to the State where the production is located. There is really no way to accurately put a figure on the royalty amount due to the various factors involved in the process.
Thanks Charles: I don’t know the meaning of “the price of oil at the wellhead”, and the “market price of oil such as WTI”. I own 170 mineral acres, with a 3/16 royalty. So what would amount to an educated guess before taxes and including “severance” for the royalty paid on one barrel? Maybe include a guess at taxes and “severence”. Thanks again. Don
charles s mallory said:
Donald:
The royalty payment will be based on the current price of oil (which varies) and the amount of mineral acres you own plus the % royalty in your lease. The operator will hold out some taxes (serverence, etc.), then you will pay taxes to the State where the production is located. There is really no way to accurately put a figure on the royalty amount due to the various factors involved in the process.
Donald:
Again I would not hazard a guess in regards to putting a dollar amount on a barrel of oil since there are so many variables involved. Go to the top of this page and click on "Mineral Help" and you might pick up some info at this site.
If you have a "wellhead price" clause, it means you won't have to share the shipping costs. Trucking oil out costs several dollars/bbl transport fees above even pipeline transport. There *might* be a lease provision that allows for refinement costs to be assessed if the operator can see enough profit above the unrefined product to justify the added expense. Theoretically, that would mean (worst-case) no net difference in your check to (best-case) some additional money to you.
"Market Price" might mean different amounts in different locations, but "WTI" (West Texas Intermediate, a grade of oil) is considered the US benchmark price, and is what you'll see in the Financial section of newspapers or on TV. "North Sea Brent" is a UK/EU benchmark, for another example.
Here's a link http://www.mantralandservices.com/PageDisplay.asp?p1=3655 for an oil and gas royalty calculator. As mentioned above, it won't reflect taxes due and possibly other intangibles. But it'll give you some idea.
Anything I omitted or am wrong about, someone please correct or add to. Otherwise, this is about the extent of my knowledge. HTH.
Thanks Chuck----I appreciate it. Don
Chuck H. said:
If you have a "wellhead price" clause, it means you won't have to share the shipping costs. Trucking oil out costs several dollars/bbl transport fees above even pipeline transport. There *might* be a lease provision that allows for refinement costs to be assessed if the operator can see enough profit above the unrefined product to justify the added expense. Theoretically, that would mean (worst-case) no net difference in your check to (best-case) some additional money to you.
"Market Price" might mean different amounts in different locations, but "WTI" (West Texas Intermediate, a grade of oil) is considered the US benchmark price, and is what you'll see in the Financial section of newspapers or on TV. "North Sea Brent" is a UK/EU benchmark, for another example.
Here's a link http://www.mantralandservices.com/PageDisplay.asp?p1=3655 for an oil and gas royalty calculator. As mentioned above, it won't reflect taxes due and possibly other intangibles. But it'll give you some idea.
Anything I omitted or am wrong about, someone please correct or add to. Otherwise, this is about the extent of my knowledge. HTH.
Don: Here are a few links you might find helpful.
Gives pricing for crude oil...including spot prices for WY...just click on a date
http://www.paalp.com/Customer-Center/Crude-Oil-Price-Bulletins-1363...
Presentation about WY severance and county property tax (Ad valorem)
http://legisweb.state.wy.us/budget/wyosevtaxes.pdf
Wyoming Oil and Gas Conservation Commission
Your 170 acres could be pooled into a larger unit(s). My acreage in Texas was pooled into two different oil units. Oil units where my minerals are located are running between 500 and 1500 acres. To figure your decimal interest in a unit...Take your acreage in a unit divided by the total acreage in the unit, multiplied by your royalty percentage. For example: 170 / 500 (total acres in the unit) x 3/16 royalty rate = 0.06375 decimal interest in this hypothetical unit. If this unit produced 10,000 barrels of oil at $70/bbl...your share of the revenue would be $44,625 ($700,000 x 0.06375) minus various taxes and deductions from oil/gas companies for things like transportation and processing the commodity. The deductions portion of this would greatly depend on your lease language and how it has been interpreted by the courts in Wyoming. After production began on my unit...it took 6 months before I saw anything. Hope this helps...Bill
Thanks Bill: Just what I was looking for.
William Murrell said:
Don: Here are a few links you might find helpful.
Gives pricing for crude oil...including spot prices for WY...just click on a date
http://www.paalp.com/Customer-Center/Crude-Oil-Price-Bulletins-1363...
Presentation about WY severance and county property tax (Ad valorem)
http://legisweb.state.wy.us/budget/wyosevtaxes.pdf
Wyoming Oil and Gas Conservation Commission
Your 170 acres could be pooled into a larger unit(s). My acreage in Texas was pooled into two different oil units. Oil units where my minerals are located are running between 500 and 1500 acres. To figure your decimal interest in a unit...Take your acreage in a unit divided by the total acreage in the unit, multiplied by your royalty percentage. For example: 170 / 500 (total acres in the unit) x 3/16 royalty rate = 0.06375 decimal interest in this hypothetical unit. If this unit produced 10,000 barrels of oil at $70/bbl...your share of the revenue would be $44,625 ($700,000 x 0.06375) minus various taxes and deductions from oil/gas companies for things like transportation and processing the commodity. The deductions portion of this would greatly depend on your lease language and how it has been interpreted by the courts in Wyoming. After production began on my unit...it took 6 months before I saw anything. Hope this helps...Bill