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PETRO 4300 S 11 CLASS 4

PETRO 4300 S 11 CLASS 4 - PETRO 4300 PROPERTY(ASSET...

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PETRO 4300 PROPERTY (ASSET) EVALUATION LECTURE 4
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LESSEE LESSOR Royalty Burden Total gross production (actual lease sale) WI 1 WI = 100% RB + YS = 100% OF WI SHARE Your net share How a barrel of production is split WI 2 WI 3 1 - RB
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LESSEE LESSOR Royalty Burden 1 - RB OV % 1- OV % Total gross production (actual lease sale) WI 1 WI = 100% RB + YS = 100% OF WI SHARE Your net share “override” ASSIGNED BY YOU How a barrel of production is split WI 2 WI 3
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LESSEE LESSOR Royalty Burden Undivided override CARVED OUT OF WI Your Share OV % 1 - OV % Total gross production (actual lease sale) WI 1 WI = 100% RB + UO + YS = 100% OF WI Your net share How a barrel of production is split WI 2 WI 3 “override” ASSIGNED BY YOU
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LESSEE LESSOR Royalty Burden Undivided override CARVED OUT OF WI Your Share OV % 1 - OV % - PP Total gross production (actual lease sale) WI 1 WI = 100% RB + UO + YS = 100% OF WI Your net share How a barrel of production is split WI 2 WI 3 “override” ASSIGNED BY YOU PRODUCTION PAYMENT
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OWNERSHIP FINANCIAL TERMS EXAMPLE 1: YOU BOUGHT A 100 % MINERAL INTEREST IN A TRACT FOR A 1/8 ROYALTY IF THE WELL YOU DRILL MAKES 250 STBOPD AND THE OIL PRICE IS 60 $/STBOPD WHAT IS YOUR NET REVENUE? 250 * (HOW MUCH OF TRACT YOU OWN ) * (1-RB) 250 ( 1 ) (1 – 1/8) * 60= 218.75 $/DAY EXAMPLE 2: YOUR SHARE IN A WELL IS 65% AND YOU HAVE A ROYALTY BURDEN OF 3/8. IF THE WELL MAKES 250 STBOPD AND THE OIL PRICE IS 60 $/STBOPD WHAT IS YOUR NET REVENUE? 250 * (HOW MUCH OF WELL YOU OWN ) * (1-RB) 250 ( .65 ) ( 1 – 3/8) * 60 = 101.56 $/DAY EXAMPLE 3: YOU ARE BUYING FROM A PROMOTER 100 % WI IN A LEASE CARRYING A 3/8 ROYALTY BURDEN AND THE PROMOTER HAS ASKED FOR A 1/8 UNDIVIDED OVERRIDE, IF THE LEASE PRODUCTION IS EXPECTED TO BE 200 STBOPD WHAT IS YOUR NET REVENUE IF OIL PRICE IS 60$/STBO? 200 * ( 1 ) * (1-3/8-1/8) * 60) = 6000 $/DAY EXAMPLE 4: YOU HAVE A 64% WI IN A LEASE, IT CARRIES A 1/4 ROYALTY BURDEN AND YOU HAVE ASSIGNED A 15% OVERRIDE TO A THIRD PARTY, IF PRODUCTION IS 300 STBOPD AND OIL PRICES ARE 60 $/STBO WHAT IS YOUR NET REVENUE: 300 * (.64) * ( 1-1/4) *(1-.15) * 60 = 7344 $/DAY
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1) A lease will become a tract in the unit with an assigned participation factor 2)Each company will get a portion of the unit production and expenses based on the sum of the participation values for each of the lease that it contributed Sum of part. Factors = 100% 3) Each company is then responsible to settle with the land owner for each of the tract based on the original WI and burden agreed when the leasehold was obtained
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UNITIZATION ISSUES NOT ALL LEASE OWNER (TRACT OWNERS) MIGHT WANT TO BE IN THE UNIT. NOT A MAJOR ISSUE WHEN YOU CAN FORCE POOL/UNITIZE. NOT ALL MINERAL RIGHT OWNERS MIGHT WANT TO PARTICIPATE WHICH MEANS THEY ARE IN THE UNIT BUT THEY DO NOT PARTICIPATE IN THE UNIT PRODUCTION BUT THEY GET PAID FROM THE ACTUAL PRODUCTION OF THEIR WELLS. FINANCIAL ISSUES AND MONTHLY ALLOCATION ISSUES.
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CASH FLOW MODEL WORKHORSE OF THE FINANCIAL EVALUATION OF ANY ASSET
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OIL/GAS PROPERTY CASH FLOW DIAGRAM GROSS PRODUCTION - SHRINKAGE = GROSS SALES * NET REVENUE INTEREST ( NET TO GROSS RATIO) = NET SALES * PRICE = GROSS REVENUE - SEVERANCE AND AD VALOREM TAXES
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