Royalties in the Barnett Shale

Easy Math on Barnett Shale Wells

Annual Royalty Payment Based on 640 Acre Spacing

A. Average Production Decline on Barnett Shale Well

1st yr.65%, 2nd yr.40%, 3rd yr.30%, 4th yr.25% and 20% thereafter

B.Average Daily Production Rate on Barnett Shale Well

1st year – 2000 MCF/D

2nd year – 700 MCF/D

3rd year – 490 MCF/D

4th year – 370 MCF/D

5th year – 300 MCF/D

6th year – 240 MCF/D

C.Annual Royalty Check Per Acre Based on $4.00 per MCF and

640 acre spacing

Annual Check= Annual Production X Price X Royalty

Well Spacing

1st year Royalty Check = 2000MCFX365 days X $4.00 X 0.25

640 acres

1st year check =$1,141

2nd year check = $399

3rd year check = $279

4th year check = $211

5th year check = $171

6th year check = $137

Total = $2,338

D.Total Royalty Payment Over Life of Well

Payments Over First 6 Years - $2,338 47%

Payments Over Next 24 Years - $2,662 53%

Based on 3.2 BCF Reserves - $5,000 100%

Now XTO did create well pools in Southlake with as little as 320 acres, so you could potentially double this amount if you were in a pool this size. 640 acre spacing was used because this was noted in the majority of XTO leases in Southlake.

$ A “Royalty Estimator” was sent to several Home Owners Associations regarding the Joe Wright Site that had some grossly inaccurate information regarding potential payments. Whether you are in favor or against gas drilling, it is important that everyone is working off of the same information and that it is accurate. This is the "Royalty Estimator" that was sent originally out via email. A couple of columns immediately draw your attention if you have any experience with gas royalties. Monthly Royalty Payment. The projected $4,888 monthly royalty payment is incorrect at best and downright deceptive at worst. Numerous times leaseholders have been told to expect thousands of dollars in royalty payments every month. With the exception of very large landowners and the pad site owner, this simply isn’t true. The calculations below will explain this in further detail. Pool. The home owners targeted by this email are in the neighborhoods of Versailles, Miracle Point, Cambridge Place, Woodland Heights, South Hollow, and Woodsey Court. These neighborhoods (not including Miracle Point and various homes in Versailles) are included in the Joe Wright "B" Unit, Well 1H. This information can be found on the Texas Railroad Commission website and is part of the latest application submitted by XTO. The total leased acres in this "pool" is 324 acres, not 70 acres that was entered on the original calculator. Well Output. As stated at the bottom of the “calculator” most recent horizontal wells range between 1000-5000 mcf per day not 9000 mcf This is a gross overestimation. Very few wells ever generate this level of output. The "Historical Performance by County of Barnett Shale Gas Producers to Jan 1, 2010" shows a much lower output and is linked here: http://www.barnettshalenews.com/documents/2010%20charts/CountiesPMDAMCF%20to%201-1-2010.pdf Yearly Royalty Payment: Do gas wells produce the same amount of gas per day for years? NO. Production typically drops by 56% the first year and 27% the next year. The vast majority of gas produced by a well is in the first 2-3 years. This is why the numbers from the DFW airport wells seem so good, because they are in their peak production years. This will not last and the wells will have to be re-fracked to continue any significant production (water trucks, rigs, noise, etc). This document summarizes these facts. http://www.barnettshalenews.com/documents/2009/2009%20Tarrant%20County%20Barnett%20Shale%20Revenue%20Estimate%20for%20Neighborhoods.pdf The idea that a well will produce for 20-40 years is a complete fallacy. Wells of this type using this technology only began 8 years ago in the Barnet Shale. The reality is that wells are lasting closer to 5-9 years and that gas companies are rushing to drill more wells to manage their mortgages on the inflated leases they bought up 3 years ago and to prop up their financial positions for investors. Here is a link to an industry analysis of Barnet Shale Gas Production. Here is the royalty estimator with more realistic data including the pool size and production numbers: The bottom line: In this calculator, the Joe Wright B Unit Pool can expect to receive about $206/month/acre BEFORE TAXES instead of the $4888/month/acre as shown in the original calculator! This is still double the average of $100/acre/month lease holders in Fort Worth and our area are averaging. Can you trust a group that gives you data that is this inaccurate? Weigh these payments, which will immediately start to decline, against your health, your safety, your enjoyment of your property and your properties value.$ shapeimage_2_link_0

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Home Facts about Drilling Facts about Royalties In the News Resident’s Letters

Where They Want to Drill Refuting the Arguments for Drilling What Can I Do

City Council Shenanigans Photos Milner Site Joe Wright Site

Ask John Terrell about the DFW lawsuit vs Chesapeake and royalties.