Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1932-07-23


year. IN the state House az Helena
and the figures ars public Informs
ton. From she records Of the state
a man can ascertain how much one
eighth Of one per cent royalty on
any producing tract in the state
has earned since the sale OF the
first barrel Of Oh.
The royalty investor has the same
facts to guilds aim that guide the
operator. Soon after the discovery
OF an OH field. petroleum engin-
GERS are able 10 determine approx
mately how much oil the field win
yield per acre. They measure the
thickness OF the sand. the poroaity,
the saturation and other factors
and determins by mathematics the
probable VALUE Of all the re-
coyerable oil in one acre OF land.
frequently. petroleum engineers
are wrong. but they don't stay in
the business II they are frequently
too HIGH. Competeng engineers
who value their Jobs frequently
UNDER estimate the yield Of q
field, 30 that the man who invests
s100 in a given royalty can deter
mine what yield may be fairly ex-
pected from bis Investment.
In Cat Greek. bhe engineers first
estimated q possible recovery Of
5000 barrels 20 the acre. The man
who bought royalties on that basis
made a lot Of money. For. as the
wells continued 10 show no decline,
these Figures were REVISED and
the amount Of recoverable oil un-
der each acrs was fixed az 10000
barrels. Later. the engineers were
forced to admit that they were
again zoo conservative. owing to
unusual conditions which they could
not Toresee. and they must DOUBLE
the revised estimates The yield OF
Cat Greek "a aate, reduced to dol
lars. is sss.e00 per acre. To the
royalty owner this means that one
per cent on enc acre has yielded
$3.50. AS the field is still produc-
ing. and lower sands INFESTED. It
Is predetermined now much more
each per cent OF royalty win yield
But the intelligent royalty investor
would not 80 beyond the latest en-
cheering estimates and the tax
laws make II necessary to set MP new
evaluations ffom EEine to time. In
other words. the royalty investor
MUST look at the total possible
yield. less the amount actually
taken out, to determine the value
OF Cat Greek royalty At the present
time. He might gamble on lower
sand production-but that is
something else.
The man who bought royalties in
Cat Greek In the early days based
his possible profit on a recovery
of 5000 barrels OF OH. then worth
50 a barrel. Out OF that recovery
he expected to get his money back
and q minimum Of 500 per cent
profit. If he paid more, he made
what seemed to DE a foolish invest
ment, just like loan company
loaning more than SO per cent Of the
value on . piece OF farm land. It
was done in many instances bat II
WIS BAD BUSINESS despite the
fact that many proved perfect risks.
However. most OF the early-day
royalty investments ia Cat Greek
were on a much more advantageous
basis than four-for-one, as Is true
in every oil field. the cautiouz
royalty investor who takes wildcat
and ahead-of-the-drfll royalties de-
mands a much greater possible
percentage OF profit than is ever
likely IN royalties that are purchased
on q producing baais
In Cat Greek we find an object in
royalty WORTH. The man who sees
in wildcat structure q potential
Cat Greek does not base his M
vEsTMmRgT on Get Greek WORTH
In other words. he viii not pay
$40 per acre point Zone per cent
royalty on one acre) figuring that
ne win get his money cut and
thereafter 400 percent profit In
stead, he win be induced BY the 81
milarity OF the folds. or the ma
ture Of the sands or other favor
able comparisons % Make AN nv