Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1940-03-09
ocwF HAD BOUGHT ROYALTIES
ON THE BASIS YOU ARE NOW
4RUYING THEM. I WOULD HAVE

SSwF HAD BOUGHT ROYALTIES
ON THE BASIS YOU ARE NOW
BUYING THEM, 1 WOULD HAVE
OWNED 10 OF THE OIL RIGHTS
WHERE 1 NOW OWN 18TH OF To-"
writes an eastern royalty investor who
has several thousand dollars invested in
royalties and who has been following the
situation i'm recent years although unable
to make further investments since the
depression.
The same factors which cut his buy
ing power have cut the price of royalties
to a point where those who are just
starting in the royalty business can buy
10 royalty today for the price paid for
Is of 10 back in the balmy days be-
fore the depression. This investor COM
mented on a current royalty Offering
where he could have bought I Oh royalty
for $40, whereas he paid $500 for
18th of Oh on the Offsetting land. The
tracts are undevelOped and equally val
liable today. He will get one barrel out
of every 500 barrels produced from his
land from $500 investment; the inves-
tor today will get one barrel out of ev-
cry 100 produced from a $40 invest
ment in the adjoining land.
The PRICE of royalties changes but
the VALUE does not change on unde-
velOpcd oil land. The VALUE of a roy
atty is determined by the amount of re-
field, royalty VALUE can be estimated
by
I. The saturatiOn method, which in
cIudes the barreI-per-acre and the bar
misrepresentation methods and
2 The historical method which is (a)
mathematical and (b) graphic.
This is the work of petroleum engi-
neerS who can advise operator wheth-
err it is profitable to drill wells in a
given district. Every royalty investor need
not be a petroleum engineer but he
should at least know how a petroleum
engineer proceeds to evaluate oil land.
That is information we gladly provide
every member of our organization.
There is no absolute method to apply
to undrilIed land but when a tract is
surrounded by production the history OF
development gives an adequate clue to
royalty VALUES. If developed portions
of adjacent tracts have produced 5000
barrels per acre, it is fair measuring
stick for the possible yield of the unde-
veIOped portions. 1t tells us, I'm any event
not to expect the Cat Creek rate of
yield, which is $4,000 worth of oil per
acre. If we can determine the average
yield per developed acre in a given field,
have some general idea what to eX-
pcct for the VALUE of royalty.
The PRICE is something else. We
saw the PRICE of HOwling royalty In
Kelvin Sunburst field go TO s12O per
cent per acre. Some of our own MEM
bers were smart enough to SELL at that
price. The years have proven their
good Judgment. That particular leases
(TeXas-Pacific HOwling) has produced
S93O,OOO worth of oil. One per cent
royalty has paid $0,3OO The ones who
sold 10 years ago received $4,000 for
one per cent: $500 more than the earn
ings to date. The tract will probably
produce more than 5000, 900 worth of
oil, eventually, but it is an extraordinary
lease with yield of S11 ,625 worth of
oil per acre thus far Over the years
we have based our expectations on an
average yield in this field of not to ex-
coed $4,000 per acre.
The Offsetting 80 acres, by way of con-
tract, has yielded $5,591 per acre, pay
ing the owner of 10 royalty S4,473.16.
That tract is the COntinenfAI-H owling.
Offsetting the HOwling on the north is
the OhiO-Baker farm which likewise has
a sensational production record. But