Marginal Royalty Calculation Example
Link to Printable PDF Version
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Well Event in Zone A |
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Horizontal Well |
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Total Measured Depth = 1,500m |
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Total Production in Year One: 5,100x103m3 |
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Total Producing Hours over Year One: 5,000 hours |
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Threshold Calculation:
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= 16.3 m3 per day per
metre of well depth
| 5,100,000 m3 x 24 hours/day | 5,000 hours x 1,500 m |
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The Well Event in Zone A is less than 23 m3 per day per metre of well depth, therefore, all average |
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daily production less than 25x103m3 per day would be eligible for the marginal royalty calculation. |
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Now calculate the Marginal Royalty for the Well Event in Zone A for July, 2004. |
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Average Daily Raw Gas in July, 2004: 17x103m3 |
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Marg Select Price: |
$ 70 |
per 103m3 |
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Reference Price: |
$ 210 |
per 103m3 |
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PART A: INITIAL ROYALTY PERCENTAGE CALCULATION: |
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R%i=
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9 x SP + 40 (RP – SP) |
{but cannot exceed 27%} |
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RP |
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where |
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RP |
= |
Reference Price |
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SP |
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Select Price (fixed at 70 for the Marginal Well Royalty) |
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R%i =
= 29.7 %
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9 x 70 + 40 (210 – 70) |
= 27 %
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210 |
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PART B: |
LOW PRODUCTIVITY REDUCTION FACTOR: |
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LPRF =
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252 |
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where |
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S |
= |
Average Daily Raw Gas in a Month in 103m3 |
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also: |
S |
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25 x 103m3 to qualify for a reduction |
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= .1024
LPRF =
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252 |
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FINAL ROYALTY PERCENTAGE: |
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R% = R%i less {R%i x LPRF} |
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R% = 27 % less (.1024 x 27%) = 24.24% for all production out of Zone A |
