Bearcat is 2 years into a 3 year lease on my property. They are now offering for me to lease or assign interest to continental for bonus consideration with 4 offers. $1600 per net acre with an 1/8th; $1200 with 3/16; 1000 with 1/5. Then part of that offer says delivering to continental 87.5net revenue, 81.25, 80% on each of above offers. Does that mean they take that percentage? Also says I can elect to participate in the 10 million dollar drilling process by paying by the due date on the OK corp com pooling order. Translation, please:)
I am very interested to read what comes forward from your post as my rights are somewhat close to yours.
I also have a similar offer in 13. You do not want the $1600 with 1/8. What you really probably want is a 1/4 and they are not offering it yet. In plain English, the operating company (Continental) will take on the risk of drilling the well. In turn, you will get a royalty of 18.75% (3/16ths) or 20% (1/5) or 25% (1/4) from the sales of the hydrocarbons from day 1. The company will get the rest and out of that will pay for the drilling of the well.
You do not have to choose to participate in the well and beginning mineral owners probably should not. Or you can be a working owner and participate. If so, you will contribute your portion of the drilling costs and also be able to get some of that 80%+ return. Not for the uninformed, but it can be lucrative or dangerous to your bank account.
The real issue is the terms of the lease. Since you are already held to a lease, they are trying to "top lease" or extend your lease before it is finished. I do not like to do that. Too many things can change in a year. If you took the standard lease from Bearcat, then it was probably not in your favor and you can hope that it will expire before the drilling so you can negotiate a new one. If you had a good Exhibit A that limited some of their clauses, then you may be in better shape.
To give you a feel for the area, Marathon just force pooled s 24 for $1600 3/16, $500 1/5 $0 1/4. Continental has two force poolings pending in 26 & 35, so it would be a good idea for you to wait and see what those turn out to be. Force pooling can really be your friend in this area.
The other SUPER important thing is the long term situation here. It is NOT ABOUT THE BONUS! The Woodford play generally has one well that is drilled to hold the section, then they come back in and drill multiple wells if the geology will support it. These wells deliver most of their payout in the first four years, but then last for 25-30 years. It is the royalty choice that is important. I am attaching a spreadsheet with a generic Woodford well with 10 acres and the Marathon pooling amounts. (I am not taking Bearcat's offer at this time.) Take a look at the difference in the payouts (Columns MNOP rows 3-5) according to the royalty. You are ahead by year 2 if you take the 1/4 royalty. Look at 2 wells, look at 4 wells. Look at 9 wells! I am not guaranteeing anything. I am just trying to let you see what your options may do for you. I have several sections with 9 wells, so it is happening.
Now, input your net acres and play with bonus amounts and production amounts and see what might happen. It is enlightening. If I were you, I would sit tight and wait. Or you could be bold and ask for $500 and 1/4 and see what they say. It is the 1/4 you want.
1631-NMACalculationsimplemodifiedfor3bonus.xls (50 KB)M. Barnes - Thanks for sharing the spreadsheet!! What a great tool for a newbie such as myself. Glad you left the worksheet "unprotected"; I could add my weird 22% royalty.. Thanks again, your knowledge is incredibly valuable to, and appreciated by, us amateurs.
Yes, thanks Mr. Barnes....this is fantastic information.
Zach
I just turned BearCat down after running my acres through the spreadsheet. I am waiting on Force Pooling.
Martha
Thanks M. Barnes, very helpful!..I considered asking for $500 1/4…but may hold off now also. By the way what is force pooling?
http://lawlibrary.unm.edu/nrj/26/3/02_eubanks_economic.pdf
Here is the long version.
The short version is that once a company has 51% of the land leased, they will go to the OCC to force the rest of the owners to lease. The OCC will hear the evidence and then give several options of bonus and royalty pairs based upon the nearby leases. You have 20 days to decide. Actually a great thing in certain areas. Waiting for it here! Take the low bonus and the high royalty!
I'm right next door to you in 15 1N6W and got the same offer from Continental, my standard Bearcat lease expires July 17, 2015. I see no choice here but to try and wait 'em out - the pooling order most likely won't be in place before January/February, 2015, and that leaves them roughly 6 months to become "engaged in the operations for the drilling, testing or reworking of any well on the lands covered by this lease..." Intentionally vague wording. I'm pretty sure Continental has no more than 15 rigs in all of southern Oklahoma, so it will come down to what constitutes them being "engaged". They have legions of lawyers who will argue that putting up a sign/building an access road/parking some equipment on the site will meet the terms of the lease. How can we fight that? It looks like a long shot to get a better deal, as they have us by the short hair via the wording of the Bearcat lease. I do know that the next time a land man uses the term "mailbox money" on me I'll do my best to reach through the phone line and punch his lights out.
Kenneth,
You have to fight those battles "before" you sign the lease. Define "commencing operations" in a clause. But plenty of the battles have been won because there was not a rig on site capable of drilling to the target distance.
BTW, Continental current has about 24 rigs operating in southern Oklahoma Primarily in Grady and Stephens Counties.
I think they are worried about getting a rig on it prior to July 2015 or they would not be offering to top-lease you now.
Mailbox money gets me a bit, but I must admit I used it. But by referring how the owners treat royalty payments. The owners that their entire research and management is limited to pulling the check out of the mailbox and depositing it.
A landman included this in an email to me the other day "wish I had minerals of my own for some free money!"
This was on a lease I was working on for property owned by someone else. It may result in the owner leasing it to me instead of the land company/operator to get better terms for them.
That is the problem with some (but not the majority) land companies and landmen. They think something is better than nothing so you should take it. But on the other hand, there are also plenty of mineral owners out there with unreasonable expectations.
Rick, thank you for the levity.
Zach
Thanks Rick We have received several of these, one in a section that bearcat only leased and conveyed east half of one section to continental bearcat said west half was HBP in 2012 which was not the case…bearcat says these mailings were only for curative purposes, which means they want to make certain there are no legal claims , any legal issues with them…any one of them, so pay attention to what is going on in spacing of the new well, they can if you have any shallow wells ,despace you and keeping many from being able to receive lease bonus…I have confidence in Continental and hope I will have in near future.I cannot say anymore except be very aware of any holdings you have in 1 n6 w.
Rick Howell said:
Kenneth,
You have to fight those battles “before” you sign the lease. Define “commencing operations” in a clause. But plenty of the battles have been won because there was not a rig on site capable of drilling to the target distance.
BTW, Continental current has about 24 rigs operating in southern Oklahoma Primarily in Grady and Stephens Counties.
I think they are worried about getting a rig on it prior to July 2015 or they would not be offering to top-lease you now.
Mailbox money gets me a bit, but I must admit I used it. But by referring how the owners treat royalty payments. The owners that their entire research and management is limited to pulling the check out of the mailbox and depositing it.
A landman included this in an email to me the other day “wish I had minerals of my own for some free money!”
This was on a lease I was working on for property owned by someone else. It may result in the owner leasing it to me instead of the land company/operator to get better terms for them.
That is the problem with some (but not the majority) land companies and landmen. They think something is better than nothing so you should take it. But on the other hand, there are also plenty of mineral owners out there with unreasonable expectations.
I received a pooling notice from Continental regarding Section 17, Township 1 North, Range 6 West. The hearing was held Sept 29th but I don't know the outcome. In the meantime, I received several offers to lease my mineral rights. I haven't signed any of the leases yet, and wonder how would I receive my royalties if I decide not to lease?
I discovered that I also own mineral rights for 9 other sections.
The hearing was postponed I believe to late October or early Nov-can't remember. So you can still lease or you can wait until the actual hearing. Be very careful about your lease terms here. Do not take the "standard" lease form they will give you.
If you decide not to lease, then you will be subject to the pooling when it finally happens. You will have 20 days to make your election and you will get your bonus from Continental.
You will get your royalties from Continental (or the company that is buying the products) no matter to whom you leased.
What would be considered a 'good' lease?
Who would I contact to let them know what option I've elected?
Do you happen to know what kind of bonus I'd receive from Continental? I was told by a company that wants me to lease it would be whatever they wanted to pay me.
If you wait for the Force Pooling, you will get a letter from Continental with two-five options. You have 20 days to answer to the name and address listed in the paperwork. Most of us would take the 1/4 or 1/5 option.
If you choose to lease, you can friend me and I can go over the lease with you and tell you what is good and what is bad. The first lease you receive will not be in your favor, but most of the lease clauses are negotiable. You also want an Exhibit A addendum with some further clauses.
I would suggest that you read the main comment wall for the last six months or so for Stephens, Grady and Garvin to familiar with what is going on. Quite a bit of comments on leases and clauses. Go to the top of this page under MINERAL HELP and read the Do's and Don't Tips for leasing. Then you will be a leg up on what is important.
I would like to re-visit this thread and ask for any updated information about leases - Bearcat is pounding at me to lease what the records show to be just 1.3333 acres in 3001N05W. The original deed was an odd one that deeded acreage in both Sections 29 and 30 together. The legals are easy enough to decipher, but there were 4-1/10 parcels deeded away by my grandfather, whose original interest was 1/2 of 120 acres. Those deeds also describe the 2 sesctions - have been interpreted as 12 acres each - 1/10 of 120. I have copies of them, and although I can't be sure of the intent, the language seems consistent - but I've been trying to coax everyone who calls me wanting to lease or buy to include access to title opinions in 29 and 30 ;-).
So far, for a meager 2.666 acres (my sister's hanging back, with me) Bearcat has offered $250 and 1/4. Which I would probably be fine with, except whatever I own, I own 2 x that much in Section 29, where the Wilkins appears to be producing??? And I have heard not a word from Contintental. No notices of any kind, no DO's, and, of course, if you click on "investor relations" on their home page it comes up "ERROR!" and my attempts to call them equally futile. Anyone have recent bonus + 1/4 from them, near me? And what's the latest with the Wilkins? I really have learned to research most sources; can see it is active, but don't know exactly where it is along the spud to dough (ha, almost a pun!) spectrum. All information appreciated!! I'd be SUNK without this forum.
Wilkins was spud July 31, 2014. Probably took three-six months to drill. No completion report yet, but you will not see a DO until six months after first production. Earliest estimate to see it would be April, latest about July or so.
Pooling orders were issued on 29-1N-5W in February 10, 2015. If you think you have acreage and you didn't get one, you better contact them. CD 201405497 Order 636393 List of folks is at the end. If you leased, then you would not have gotten a letter. The offers were $1300 3/16, $750 1/5 $0 1/4, so your $250 is pretty good.
30 is not up for pooling yet.