AboutLinn A. Willers Expertise By occupation I'm a professional mineral manager who began my career managing Northern tier minerals (ND, MT and CDN with a sprinkling of OK & TX). I latter managed Rocky Mountain and Mid Continent minerals and currently manage a large set of Gulf Coast minerals along with the afore mentioned.
Experience Over the past 22 years I have always respresented issues from the mineral/royalty owner prospective. Organizations: National Association of Royalty Owners (NARO), American Association of Petroleum Landmen, Denver Association of Petroleum Landmen, Rocky Mountain Mineral Law Foundation, Energy and Mineral Law Foundation, National Association of Division order Analysts (NADOA), National Association of Lease Title Analysts (NALTA) and the Southwest Kansas Royalty Owners Association. Over the last ten years I have given various mineral management conference presentations, in Albuquerque, Dallas, Fort Worth, Oklahoma City and Tulsa and on a number of occasions I have presented or co-presented the Certified Mineral Management Review Course. I have a Business degree, I'm a Certified Mineral Manager and an RLP with the American Association of Petroleum Landmen. I'm a three term Past President of National Association of Royalty Owners (NARO) and the Immediate Past President.
Expert: Linn A. Willers Date: 7/5/2008 Subject: Oil & Gas Lease Mountrail County
Question QUESTION: My family and myself also own 80 Acres of mineral rights in Mountrail County. Township/Range 156N-92W Section 35. Supposevally Hess Corporation already has 1 "spuding" and is starting another this week. Which would mean 2 wells thus far on our property. We leased in 3 years ago and recieved what we were told is a "standard" lease @ 1/8th or 14% royalty. Our question is What will that convert to in dollar and cents!!!!!Noone seems to be able to answer us. I understand that it is based on how much oil is pumped, but lets just use an average in the area. 1000 barrels per day according to the experts on Mountrail County. Please give us an idea. Thank you
ANSWER: Hopefully the royalty is 14 % vs 12.50% (1/8). No one can answer your revenue question until there is actual production. Most wells in this are are spaced on 1,280 acres. Your future royalty will calculate as follows: 80/1280 times your lease royalty times the cash value of the production sold. Product marketing costs and state production taxes will reduce the previous calculation for a net monthly check.
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QUESTION: I am sorry but I may of been absent in algebra the day we went over fractions. I am still a little confused. Base on a production of 500 barrels per day @ todays price of $140.00 per barrel, using your fraction of 80/1280 times the 14% royalty: What would be the royalty amount in dollars and cents.
Answer Assuming the well produces 500 barrels per day and the market price is $125 the result would be: 80/1280 X 500 X 14% = .0625 X 500 = 31.25 X 14% = 4.375 X $125 = $546.88 (per day) X 365 = $199,609.37 per year.
North Dakota wells will not reach the West Texas futures price therefore I dropped the price to $125. At this production rate and price the revenue would be $546 per day and $199,600 per year. These numbers are before any processing, marketing costs and state production taxes.
Just a word of caution. Don't spend it until you receive checks and remember this is income so Uncle Sam and the State of North Dakota will want their piece. I would hold back a third to cover the income taxes.
