Post on 16-Jul-2020
Texas Oil & Gas AssociationMineral Sub-Committee
ANNUAL TXOGA PROPERTY TAX CONFERENCE
FEBRUARY 18-19, 2020
Committee Members
➢Brad Bailey – Conoco Phillips Co
➢Michael Horne – Occidental
➢Ron Kane – EOG Resources
➢Damien Larsen – Stancil Property Tax
➢Lauro Porto- ExxonMobil
➢Randy Prince – Chevron
➢Rich Sanchez – Merit Advisors
➢Nathan Young – American Ad Valorem Tax Consultants
Mineral Sub Committee Activity
➢Meet to discuss valuation parameters
➢Schedule meetings with the Appraisal Firms
➢Summarize meeting discussions
➢Report to the Membership▪ Firm Summary File to be emailed once complete
Texas Production – Crude Oil
Top 10 Producers – Crude Oil
Texas Production–Natural Gas
Top 10 Producers – Gas
EIA Annual Energy Outlook
➢Released on January 29, 2020.
➢§23.175 Texas Property Tax Code ▪Appraisal districts must use the EIA AEO data
to calculate the Price Adjustment Factors for oil & gas if published by March 1, 2020
Price Adjustment factors
EIA - Price Adjustment factor - AEO Report released January 29, 2020
Table 12 Prices in Nominal Dollars Table 13 Prices in Nominal Dollars
Oil - WTI Spot Price Natural Gas - Henry Hub Spot
2020 Price 54.43$ 2020 Price 2.49$
2019 Price 56.26$ 2019 Price 2.57$
MAF 0.96747 MAF 0.96887
EIA STEO vs. AEO
Dec 19 STEO Jan 20 STEO Feb 20 STEO 2020 AEO
2020 Oil 55.00$ 59.25$ 55.71$ 54.43$
2019 Oil 56.70$ 57.02$ 57.02$ 56.26$
2020 PAF 0.9700 1.0391 0.9770 0.9675
Spot WTI Price - 2/11/2020 49.75$
Dec 19 STEO Jan 20 STEO Feb 20 STEO 2020 AEO
2020 Gas 2.45$ 2.33$ 2.21$ 2.49$
2019 GAS 2.59$ 2.57$ 2.57$ 2.57$
2020 PAF 0.9459 0.9066 0.8599 0.9689
Spot HH Gas Price - 2/11/2020 1.79$
EIA's STEO vs. AEO
Oil - WTI Spot Price
Natural Gas - Henry Hub Spot (MMBTU)
Producer Price IndexBLS - PPI Calculation for Oil & Gas - Full Year 2019
X = index figure for current year (Base year 1982 assumed to be 100)
Y = number of years between 1982 base year and current year
To determine average inflation rate over any particular time span:
Inflation (%) = (X / 100)^ (1 / Y) - 1
Factor 157.8 85.6
Year 2019 2019
Escalator 1.2405% -0.4193%
Crude Oil Natural Gas
2020 Pricing Escalators
Year Oil Price Factors Notes Year Gas Price Factors Notes
2019 56.26$ 2019 2.57$
2020 54.43$ 0.96747 PAF 2020 2.49$ 0.96887 PAF
2021 55.11$ 1.01240 PPI 2021 2.48$ 0.99581 PPI
2022 55.79$ 1.01240 PPI 2022 2.47$ 0.99581 PPI
2023 56.48$ 1.01240 PPI 2023 2.46$ 0.99581 PPI
2024 57.18$ 1.01240 PPI 2024 2.45$ 0.99581 PPI
2025 57.89$ 1.01240 PPI 2025 2.44$ 0.99581 PPI
2020 Tax Year 2020 Tax Year
Oil - 23.175 Max Forecast Gas - 23.175 Max Forecast
Appraisal Firm Meeting Notes New Contracts for 2020➢CAG – Cooke & Val Verde Counties
➢P&A – Childress, Comal and Gillespie Counties
➢TYP – Coryell, Dallam, Gray, Hutchinson, Jasper and Kimble Counties
➢Reeves County – In House
Appraisal Firm Meeting Notes➢Firms will use the 2020 AEO to determine the PAF for Oil & Gas Pricing.➢Escalation from BLS – years 2-6
➢Firms indicated they will adjust discount rates from 2019 or adjust property specific.
➢Firms expect mineral values to decrease based on pricing scenario.
Lease Operating Expenses➢CAG – will use actual 2019 LOE. Lease operating costs categorized as fixed & variable. Yr 1 – Flat. Escalation will vary based on category classification. (Range from .9 to 1.02 based on Oil Esc.)
➢P&A – will use 2019 actual or historic. Oil lease – de-esc 3% year 1,Flat year 2 thru 6. Gas lease – de-esc 3% year 1, hold flat all years until reaching economic limit.
➢TYP – Use 2019 actual or historical. LOE esc .8% for first 5 years then held flat for subsequent years until reaching the economic limit.
➢WAG – will use 2019 actual or de-escalate historical up to 20%. Will escalate .8% years 2-6 and hold flat until economic limit.
➢Requests sent to HLA & MAVSI
Capitol Meeting Notes➢CAGI – Discount rate – S&D analysis – ValueLine Companies (15% Base Rate)➢Min – 14.5% to Max 22%.
➢10 plus well units – reduce wells (1/2 decl *well count per year)
➢Website enhancements – Notices are now available on line.
➢Counties are requesting new copies of AOA’s.
➢New Counties – Cooke – Ken Hitt, Val Verde, Jeff Ronk
Pritchard & Abbott Meeting Notes
➢Retirements – Vic Henderson & Mac Jourdan, FTW – Mark Stewart, AMA
➢New Appraisers – Mason Patterson FTW, Malachi Ashley AMA
➢Calculates individual County base prices from Comptroller data.
➢Discount Rates – reduced 1% all properties
➢Equipment value – Discount rate reduced to 5% (2019 5.5%)
Thos. Y Pickett Meeting Notes➢2020 value reductions – Est 15% decrease.
➢Discount rate – 1% increase – 16%.
➢Added Mack Jourdan for 2020 Mineral Appraisal.
Wardlaw Meeting Notes➢Expects to increase discount rate. Rate to be finalized.
➢Requesting variable pricing WI vs. RI➢RI – Free of deducts – higher price
➢Marketing costs – won’t use 100% reported
➢LaSalle – Support for low gas prices.➢Identify Gas lift or EOR projects.
Other Topics Discussed➢Drilling Permit wells▪ Placing on Roll in appraisal cycle.
➢Unknown Interests▪ Correction of prior year roll once identified.
➢County Crossover Leases – Value Allocation▪ Leasehold acreage vs lateral length
Questions?
THANK YOU