Karnes leading state in oil production: Appraisal specialist explains mineral values and local effect of Eagle Ford Shale development
by Joe Baker
Apr 24, 2014 | 466 views | 0 0 comments | 15 15 recommendations | email to a friend | print
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An oilfield  pumpjack works to pull crude oil at a Karnes County well site.
Joe Baker photo An oilfield pumpjack works to pull crude oil at a Karnes County well site.
Joe Baker photo

An oil rig drills on property in north Karnes County.  A total of 1,536 wells are producing now in Karnes County.
Joe Baker photo An oil rig drills on property in north Karnes County. A total of 1,536 wells are producing now in Karnes County.
KENEDY – The Karnes County Appraisal District hosted a meeting in Kenedy last week aimed at helping local residents understand the methods used in the appraisal of tax values on oil and gas resources belonging to property owners.

Karnes County Appraisal District Chief Appraiser Jesse Hubbell welcomed residents to the meeting held at the Kenedy City Hall auditorium on April 16, and introduced Charles Williams, president of the Wardlaw Appraisal Group, who began the discussion of oil and gas property values.

“This is a forum for me to explain to you about the appraisal process, why we do things the way we do, how we do it, and to answer questions in that regard,” Williams said. “I am going to talk to you about what we seeing in Karnes County and the Eagle Ford and give you some idea of what is going on with Karnes County values.”

“The way we do appraisals – the way we are required to do appraisals – is not something that everybody is happy with,” Williams said. “It is not a straightforward thing for taxpayers to do.”

Williams explained that ownership interest in oil and gas in Karnes County is subject to ad valorem taxation.

“We are required to appraise each lease and every owner who receives an interest in a lease,” Williams said. “Mineral appraised values are a projection of future revenue. It is not how much you received last year. It is not how much you are going to receive this year, it is a projection of the revenue that is going to come out of that well over its entire life.”

Williams and his staff explained in detail the mathematical formulas that are used to calculate the taxable value of the projected revenue.

They also explained how wells are appraised and the protest process available to taxpayers who disagree with their property’s appraised value. It was noted that the average appraised life of a well is eight years.

“Oil is a huge component of what is going on,” Williams said, in regard to the development of the Eagle Ford Shale. “Not only is it huge, but Karnes is a huge player in it.”

Williams said 20 counties in the United States account for 50 percent of all the U.S. oil production and Karnes County is the seventh largest oil producing county in the country at this time.

Karnes County continues to lead the State of Texas in oil production with a projected 5.2 million barrels for January of this year, he said. However, Williams said actual production exceeded the projected production and 7.7 million barrels of crude oil were actually produced. Gas production, he said, also exceeded projected figures.

Williams said oil companies are reporting that they are having more success with production efforts than they anticipated. One company said they are expecting to produce 250,000 barrels of oil per day in the Eagle Ford Shale by 2017, which exceeds their own preliminary projections by 100,000 barrels per day.

Data showed by Williams showed that while in 2010 there were 244 producing wells, that number has grown to 1,536 in 2014. He added that 29 oil rigs are drilling in Karnes County at this time and the the best producing areas are near Gillett in the northern part of Karnes County.

“We could exceed last year’s drilling if it keeps up at this pace,” Williams said.

Oil dominates the production in Karnes County, Williams said, with gas production only adding up to about 10 percent of the total monetary value of production in the county.

Production continues to increase each month, he added.

“By next year, we could be at 10 million barrels per month, if it continues at this rate,” Williams said.

Sales from Karnes County oil production totaled $7.6 billion in 2013, Williams explained, with about $750 million added to that figure in sales of natural gas.

In light of the circumstances, Williams estimated that Karnes County appraised oil and gas values will rise about 25 percent this year above last year’s appraised values.
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