Good question, and one that Brandon Otis, a CPA and valuations specialist with Alpern Rosenthal, an accounting advisory firm, addressed at a recent meeting in Pittsburgh. Otis has done research on 384 Marcellus wells in Susquehanna County, PA and has come up with a list of criteria for determining value. Among the criteria he uses:
- Total acreage minus structures and waters resources
- Total number of wells drilled in the area
- Amount of time from signed lease until the well is drilled and producing (an average of 1.2 years in Susquehanna County)
- Commodity price of natural gas
- Failure rate – when wells don’t produce (research suggests nearly 10 percent of the time)
- Amount of time the well produces*
No word on an exact formula for those criteria that would give you a specific estimate of worth. Presumably you’ll need to hire the services of Alpern Rosenthal for that bit of detail.
For more information, read the entire article.
*Pittsburgh Business Times (Mar 10) – Alpern tells lawyers how to value Marcellus reserves