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BC Royalty Programs June 2006 PowerPoint PPT Presentation


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BC Royalty Programs June 2006. Introduction. 1 st Royalty program 2002 CBM royalty program OGDS 2003 Deep, Marginal and Summer royalty programs OGDS 2006 Ultra-marginal royalty program Currently working on Net profit program Last year 1427 wells drilled & 1Tcf row gas produced.

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BC Royalty Programs June 2006

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Bc royalty programs june 2006 l.jpg

BC Royalty ProgramsJune 2006


Introduction l.jpg

Introduction

  • 1st Royalty program 2002

    • CBM royalty program

  • OGDS 2003

    • Deep, Marginal and Summer royalty programs

  • OGDS 2006

    • Ultra-marginal royalty program

  • Currently working on

    • Net profit program

  • Last year 1427 wells drilled & 1Tcf row gas produced


Bc royalty programs overview l.jpg

BC Royalty Programs Overview


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Summer Royalty Program

  • Condition

    • Spud date between April 01 and November 30

  • Royalty Credit

    • 10% of the drilling and completion cost to a max. of $100,000

  • Application

    • BC 25 Form (Summer Drilling Credit Application)


Deep royalty program l.jpg

Deep Royalty Program

  • Mechanism:

    • Royalty Credit designed to recognize the increase costs

  • Requirement

    • Applicable only for Wells deeper than True Vertical Depth

      • 2500 m for vertical wells

      • 2300 m for horizontal wells

        • Horizontal Well factor

  • Implementation

    • Spud date after December 01, 2003

  • Application

    • BC - 11 Notice of Commencement or Suspension of Operations

    • OGC review

    • No transfer of royalty credits


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Deep Vertical Well Calculation

  • Calculations

    • Use tables (BHL east/west line & gas composition)

    • Royalty Credit = (CV + AD)* PS

      • CV = Cumulative Value; AD = Incremental (Depth * $); PS = Interest

  • Example

    • West special sour well at 3785m working interest 35%

    • CV at 3500m= $2.4 million

    • AD: (3785-3500)*$700 = $199,500

    • Royalty Credit:

    • ($2,400,000+$199,500)*0.35 =$909,825


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Deep Royalty


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Deep RoyaltyHorizontal Well Depth Calculation

  • Horizontal Well Depth

    • MDTP+HLF*(TMD-MDTP)

  • Horizontal Length Factor (HLF) Calculation

    • MDTP is between 2300m & 2875m

    • HLF=(30-0.035*(MDTP-2300))/100

    • MDTP >2875m HLF= 0.1

  • Total Measured Depth (TMD) Calculation

    • Depth reported from the End of Well report

  • Example

    • MDTP = 2600m & TMD = 2800m

    • HLF: 30-0.035*(2600-2300))/100=0.195

    • Horizontal Well depth: 2600+0.195*(2800-2600)=2639m


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Deep RoyaltyRe-Entry Well

  • Qualification

    • Application to Alter a Well must be submitted and approved before re-entry

    • TVD of the re-entry > 2300m

    • Re-entry date after December 01, 2003

  • Application

    • BC - 11 Notice of Commencement or Suspension of Operations

    • OGC review

    • No transfer of royalty credits to another well


Deep re entry well l.jpg

Deep Re-Entry Well

  • Calculation

    • Determine incremental distance

    • Use Tables

    • Formula (CV+AD)*SP

  • Example

    • TMDold= 5000m; TMDnew= 4550m & Well location is on the west

    • CV: 300m = $150,000

    • IV: $500/m

    • AD: (450m-300m)*$500/m= $75,000

    • Re-entry Credit

      • $150,000+$75,000 = $225,000


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Deep Discovery Well Exemption

  • Qualifying Criteria

    • New gas pool

    • TVD > 4000m

    • Rig release date after November 2003

    • New well surface location must be at least 20km away from the location of any well in a recognized pool of the same formation

  • Royalty Credit

    • Three year royalty holiday or 283,000,000m3 (~10bcf)

  • Application

    • No application necessary

    • OGC will determine if qualification are met


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Marginal Royalty Program

  • Qualifying for the Marginal Royalty

    • Well Production Rate

      • 1st Qualifier

        • First 12 month average rate < 80 mcf/d/100m (23m3/d/m)

      • 2nd Qualifier

        • Average Monthly Production Rate < 880 mcf/d (25 e3m3/d)

  • Royalty Calculations

    • Base 9 Royalty: (9 * SP + 40 * (RP – SP))/RP; Min 9% & Max 27%

      • Select Price (SP) = 50 $/m3;

      • Reference Price 2006 (RP) = 285.7 $/m3

    • Low Productivity Reduction Factor (LPRF)

      • LPRF=((25-S)/25)2 Units = e3m3/d

    • Calculation

      • 27% * (1 – LPRF)

  • Implementation

    • Production start after July 01, 2003

  • Application

    • BC - 08 Monthly Production Statement


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Marginal Royalty Program Calculation

  • Example

    • Total 12 month production (BC-S1): 7e6m3

    • Production hours over that same period: 4000hrs

    • Well depth 2300m

  • Eligibility Calculation

    • (7,000,000/4000)*24/2300 = 18.26m3/d/m

  • The calculation is less than 23m3/d/m the well event qualifies as a marginal well event.

  • Royalty Reduction Calculation

    • Average daily volume: 17,000 m3

    • Reference Price: $180/m3

    • Step 1 LPRF

      • ((25,000-17,000)/25,000)2

      • LPRF = 0.1024

    • Step 2 Marginal Royalty Rate

      • 27% * (1 – 0.1024)

      • Marginal Rate = 24.24%


  • Ultra marginal royalty program l.jpg

    Ultra Marginal Royalty Program

    • Qualifying for the Ultra-Marginal Royalty

      • Development & Exploration Outpost Wells

        • 12 month average Rate < 40 mcf/d/100m (11m3/d/m)

      • Exploratory Wildcat Wells

        • 12 month average Rate < 60 mcf/d/100m (17m3/d/m)

      • Shallow Wells Only

        • Applicable only for Wells less than True Vertical Depth

          • 2300 m for horizontal wells

          • 2500 m for vertical wells

        • Horizontal Well factor 100% of first 1000 meters and 50% of remainder

    • Royalty Calculations

      • Base 9 Royalty: (9 * SP + 40 * (RP – SP))/RP (min 9% & max 27%)

        • Select Price (SP) = 50 $/m3; Reference Price 2005 (RP) = 285.7 $/m3

      • Low Productivity Reduction Factor (LPRF)

        • LPRF=((60-S)/60)1.5 Unit = e3m3

      • Calculation

        • 27% * (1 – LPRF)

    • Implementation

      • Spud date after January 01, 2006.

    • Application

      • BC – 08 Monthly Production Statement


    Ultra marginal royalty calculation l.jpg

    Ultra-Marginal Royalty Calculation

    • Example

      • Horizontal Exploratory Wildcat well, 2300m deep

      • Total 12 month production (BC-S1): 5e6m3

      • Production hours over that same period: 4000hrs

      • Average daily volume: 20,000 m3

  • Eligibility Calculation

    • Step 1: Ultra-marginal well depth (UMD)

      • Horizontal Length Calculation

        • TMD – MDTP = 2300 – 1200 = 1100m

          • Hz section > 1000m

      • UMD = MDTP+1000+(TMD-(MDTP+1000)/2)

        • UMD: 1200+1000+((2300-(1200+1000))/2) = 2250m

    • Step 2: Check Eligibility

      • (5,000,000/4000)*24/2250 = 13.3 m3/d/m

      • The calculation is less than 17m3/d/m the well event qualifies as a ultra-marginal well event.

  • Ultra-Marginal Royalty Calculation

    • Step 3: Calculate Ultra-marginal Reduction Factor, URF

      • URF: ((60,000-S)/60,000)1.5

      • ((60,000-20,000)/60,000)1.5 = 0.544

    • Step 4: Calculate the Ultra-marginal Royalty Rate, UMRR

      • UMRR: 27% * (1 – 0.544) = 12.3%


  • Coalbed methane royalty program l.jpg

    Coalbed Methane Royalty Program

    • Condition

      • Coalbed methane wells only

    • Royalty Credit

      • $50,000 drilling credit

      • Produced water management allowance (PCOS)

      • Royalty bank transferable to other CBM wells

      • Royalty Reduction

        • Low Productivity Reduction Factor

          • LPRF = ((17 – S)/17)2;Units: e3m3

        • Calculation

          • 27% * (1 – LPRF)


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    BC Oil & Gas Useful Links

    Related organizations:

    • Oil and Gas Commission – Background:

      • http://www.ogc.gov.bc.ca/background.asp

    • Ministry of Energy, Mines and Petroleum Resources – Oil and Gas Division Responsibilities:

      • http://www.em.gov.bc.ca/subwebs/oilandgas/overview/ogd.htm

    • Ministry of Small Business and Revenue- Mineral, Oil and Gas Revenue Branch

      • http://www.rev.gov.bc.ca/mog/oil_gas/royalty_handbook.htm

    • Ministry of Energy, Mines and Petroleum Resources - Titles Division:

      • http://www.em.gov.bc.ca/subwebs/Landsale/default.htm


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