However shale well production declines and price volatility introduce significant levels of risk to the royalty income stream and ultimately to the farm family and farm business.
Penn State Extension has received a grant from the Northeast Extension Risk Management Education Competitive Grants Program to address legal and financial risks on diverse family farms, large and small, associated with oil and natural gas royalty income throughout Pennsylvania.
This project will address reading oil and gas royalty statements, understanding volatility in energy markets, and making farm management decisions based on expected royalty income. In addition, participating farmers, educators and industry supporters will gain access to Penn State's Royalty Calculator & Decline Curve Web App so they can visualize expected future royalty income.
In the next year, the program team will deliver educational royalty management workshops for farm royalty owners throughout Pennsylvania. Workshops will include modules on:
- reading and reconciling oil and gas royalty statements, including verifying production data and calculating decimal interest
- understanding volatility in oil and gas markets
- learning and analyzing energy market fundamentals and how they may impact oil and gas prices at the wellhead
- utilizing the Penn State Royalty Calculator and Decline Curve Web App to analyze current and future expected royalty streams based on a low-medium-high commodity price scenario
- understanding the risk associated with site location agreements and other post mineral leasing contracts related to oil and gas development on the farm.
The programs will be geared to small farms and ranches, retiring or transitioning producers, and traditional commercial producers in the shale footprint. Check our Natural Gas Events webpage for upcoming programs.