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Another Lower 48 survival tactic: drilling zero royalty minerals

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04 May 2016

Another Lower 48 survival tactic: drilling zero royalty minerals

Report summary

The continued drive to discover economic drilling projects in the US has led to a renewed operational strategy for some producers – drill the acreage where they own mineral rights as a form of competitive advantage against their peers. In this situation, the E&P pays zero landowner royalty, setting themselves up to generate superior returns to their offset peers. For example, the removal of a 20% royalty reduces breakeven prices by between 17 and 23%.  New company structures could emerge to capitalise on this. 

Table of contents

  • Summary and background
    • Perspective: Canada's strategy of royalty land monetisation
    • Case 1: Seneca over performing
    • Case 2: Chevron performing on par
    • Case 3: BP making up ground
      • Detail on BP's early Haynesville activity: Wood Mackenzie North America Well Analysis Tool
      • Actual activity outliers
      • Merging two models into one tactic
        • Appendix: Zero royalty company-asset files

Tables and charts

This report includes 6 images and tables including:

  • Seneca breakevens exceed averages
  • Chevron close to Average
  • Another Lower 48 survival tactic: drilling zero royalty minerals: Image 3
  • BP's early wells place its metrics below the current average
  • Haynesville permits granted
  • Another Lower 48 survival tactic: drilling zero royalty minerals: Table 1

What's included

This report contains:

  • Document

    Another Lower 48 survival tactic: drilling zero royalty minerals

    PDF 715.74 KB

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