Forecasting royalties of individual wells is highly uncertain and we encourage you to take all estimates with a hefty grain of salt. There are many idiosyncratic factors that impact each well’s results which are not modeled in the estimates. With those caveats, we regularly test our forecasts by comparing them to actual well results. For instance, we take a sample of wells and run our forecasts on a subset of their actual historical volumes. The resulting forecasts can then be compared to the actual results which were obtained from the well. Not unexpectedly, the more well production history we have, the better the forecast. In past tests our variance between actual production results and predicted production volumes has been as little as 10% in some counties when we start with 18 months or more of production history. With less than 12 months of production data we’ve seen those variances increase to over 25%. For this reason we constantly import new production data from state databases as soon as it’s released and we re-run the forecast algorithm after each new data point. Click here to see how frequently your state releases production data.
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