Cedar Valley Energy focuses on drilling
wells that are economically profitable for ourselves,
investors, and the landowner. In order for the drilling
of an oil and natural gas well to have a positive
economic impact for the landowner it must have a reasonable
chance of finding sufficient quantities of oil and/or
gas to be profitable for the corporation. In most
respects, the landowner and our company are long-term
partners in this economic venture. Cedar Valley Energy,
therefore, strives to drill wells with recoverable
reserves of at least 150,000 MCF gas or the equivalent
barrels of oil. As the following examples will show,
the return for the drilling company and the landowner
are very product price sensitive.
Recoverable Reserves (MCF)
150,000
150,000
150,000
Price/MCF
$5.00
$7.00
$9.00
Gross Revenue
$750,000
$1,050,000
$1,350,000
Landowner Royalty (12.5%)
($93,750)
($131,250)
($168,750)
Gross Revenue to Well Investors
$656,250
$918,750
$1,181,250
Well Operating Expenses
($85,000)
($85,000)
($85,000)
Net Revenue to Well Investors
$571,250
$833,750
$1,096,250
Drilling and Completion Costs
($300,000)
($300,000)
($300,000)
Net Return to Well Investors
$271,250
$533,750
$796,250
Cash on Cash Return
1.9:1
2.8:1
3.7:1
Assumed Life of Well
20 years
20 years
20 years
Landowners please note that the royalty actually received
is based upon the landowner having the well and the
entire drilling acreage on their land. If a drilling
unit (the pooling of neighboring landowners to meet
State of Ohio legal requirements) is required, then
the landowner’s share of the royalty revenues
will be based on their proportionate share to the total
acreage in the drilling unit. For example, if the State
requires a 20 acre drilling unit and two landowners
own 10 acres each, then each landowner will receive
one-half of the royalty revenues (6¼% each).
Please see the following link for well spacing requirements:
Cedar Valley Energy generally attempts
to “lock-in” as high as natural gas price
as possible reflecting current, and our view of future
market conditions. This locking-in of prices, we feel,
maximizes the economic benefit for both the landowner
and the well investors. Crude oil is always sold at
the prevailing “field market” price that
changes often, sometimes daily, based on world commodity
trading.
Unfortunately, we cannot guarantee
results for either landowners or investors as the drilling
of wells has significant elements of risk. In addition
to the geological, producing reservoir and mechanical
risks associated with the actual drilling of the wells,
market pricing conditions are variable and subject to
change.
