Can someone tell me what the going rate for three year leases in this area ? We have just gotten an offer of a three year lease @ $120 thousand for 80 acres .. The current lease expires in May.. Can someone also recommend a good lawfirm in the area .. Thanks
Well thats about 1500 an acre…you said there is a current lease on it now? Are there wells there currently producing?
Yes , the current lease expires in May. No wells producing or being drilled on section 27...
Nearest well, did 60,198 barrels of oil in 15 months ending last December, the last month I can see figures for. Not bad but not a barn burner of a well. That would be the Schilke gaddy corner NW of you in section 21.
If they want to sign another lease, to me , that sounds like they see potential. The leases I have seen or heard about are often "paid up" so to me that sounds fair. When they see potential, the price goes up. I have a friend that received over 3000 an acre after waiting it out a little bit. Although, it was a paid up lease it was a good amount per acre.
How do you define a " paid up " lease. ?
Hilary Sorenson said:
If they want to sign another lease, to me , that sounds like they see potential. The leases I have seen or heard about are often "paid up" so to me that sounds fair. When they see potential, the price goes up. I have a friend that received over 3000 an acre after waiting it out a little bit. Although, it was a paid up lease it was a good amount per acre.
I was confused on that...If there is a well drilled on the land, then it is considered a paid up lease. If there is no well, you can continue to negotiate acerage prices
A paid up lease is a lease in which the signing bonus constitutes the entire payment of delay rentals for the primary term of the lease. Means they don't have to pay monthly or yearly. Oil companies are horrible about doing things when they are supposed to, like paying on time. Oil companies love paid up leases because then there is no chance of them missing or being late in one payment and losing their lease and having to start all over again, possibly at much higher royalty amounts.
So once they drill one well what the mineral rights owner receives are the royalties going forward. A paid up lease would not incourage oil companys to drill in a timely manner then. Where was the location of the 3000 per acre your friend got ?
Exactly…the pyramid wells section 22-154n-101w
In that area I would not have leased even if they offered the $10k to $12k that the state was getting in that area. 3k was a super bargain for the lessee even if they were paying 22% royalty.
Hilary Sorenson said:
Exactly..the pyramid wells section 22-154n-101w
It was the best option for the owner at the time. I do know of some who did not sign. I’m curious though Mr Kennedy why you would not have signed
I would not take that lease. My brothers have interest in 159-97. There last offer was $2500 an acre from an investment company once they had an AFE in hand. They decided to go non-consent. If you want the investment companies info let me know. Kodiak just recently drilled on their section. Also what royalty was offered?
Because with ND forced pooling law, with good wells I would basically be trading places with the operator. Their 50% risk penalty from me being non-consent would probably leave them with about 10%- 20% of the profit while I would keep 80% of the profit, less cost of production and taxes. Other than making 3-4-5 times as much from the sale of my oil, no special reason.
For goodness sakes, you even get a 16% statutory royalty until the well is paid for and the risk penalty recovered, then 100%, less the often laughably low cost of production. I have one well that costs about $1.50 an acre per month to produce If the well never pays off, you owe nothing out of pocket. I've missed out on $3,000 per acre bonus that they offered which I figure is less than 1% of my acres value but I will receive 300% or more money than leasing for 20%. royalty.
Lessees/operators get alot for that sub 1% up front. I get 75% as much royalty as anyone else who leased in the spacing, more than 75% if they leased for 3/16 until the penalty is paid off. I can give up the bonus and take a little less for 2-3 years to make 4 times as much for the rest of the life of the well.
Put another way, since you know you are going to get 16% no matter what, by leasing you are selling 80% or more of your oil for the maybe 1% bonus and up to 4% more royalty for a couple years. I expect my revenue to pass what I would have received as leased within the first 6 months or less after my well and penalty are paid off.
At $100 oil operators are making about $60 a barrel, after paying for the well AND paying up to 20% royalty, I on the other hand will not have to pay anyone a royalty so I will actually as owner make 16% to 20% more than the operator for each of my barrels of oil than they will from their production of the other acres because they do have to pay a royalty from proceeds.
With wells that will pay off the penalty in 3 years or less, no out of pocket risk, at least 75% as much royalty as everyone who did lease receives, I consider it a no-brainer, that is if you knew you could do it. Of course it's not an option if you don't know it exists. If the option and benefit of being non-consent, in it's true form and not how a landman may slant/ get wrong or outright tell untruths about, were widely known, the laws on non-consent would have been changed in ND. I don't think they will change the laws now because the great majority of the prime producing acres are already HBP rendering a law change almost moot.
My brother is with me in this and believe me, he IS the bird in the hand guy but after I explained it to him, he could not resist. We have been getting our checks just as if we had leased, just a little smaller and one day it will be BAM, more money per month than those who leased ever received even when the well was new and because the well has already leveled off, our checks will only diminish slowly over time. It's a wonderful deal for us. If you have undrilled minerals in ND you should read and understand NDCC 38-08-08 you may not want to lease afterwards.
There are pundits who say you would be responsible for plugging costs of the well. That is only true if you aren't smart. You have the right by law to assign your interest in the well to the operator at any time, the salvage value will be determined and they will have to cut you a check. How would you like to be paid for the plugging of your well instead of having to pay for it?
If you go non-consent, you have years to learn the business. If you learn the business, you will do well. You could sell out at any time after payout, sell half, whatever and make the amount you would have received in royalty over 20 years in 4-5 years, if you want. My operators still send me lease offers, LOL. There are only 2 things you can do that will end your options, one is sell which leaves no option and the other is lease which only leaves the option to sell. As an owner, you could cut any kind of deal you can think of. I like having options, it makes me comfortable.
Hilary Sorenson said:
It was the best option for the owner at the time. I do know of some who did not sign. I'm curious though Mr Kennedy why you would not have signed
What is non-consent ? Does that just mean saying no ? Whats the oil companys recorse if the mineral rights owner wont sign a lease ? Yes Id like to know about all I can about all this . Which section number did KOG drill on ? AFE stands for what ? thx
Kevin said:
I would not take that lease. My brothers have interest in 159-97. There last offer was $2500 an acre from an investment company once they had an AFE in hand. They decided to go non-consent. If you want the investment companies info let me know. Kodiak just recently drilled on their section. Also what royalty was offered?
Dale, non-consent is saying no...or just do nothing and it happens automatically.
If you do not lease and consent, the operator will force pool you because you can't block the development of others minerals in the spacing.
The Schilke well is caddy corner NW of you in section 21.
An AFE is an authorization for expenditure, it's the well participation proposal with estimated costs. Mainly the AFE is of interest if you are going to pay for your part of the well up front and be a working interest. There is also the matter that the operator can not impose the 50% of actual cost of drilling and completing risk penalty until they have made a lease offer, which you refused, AND offered you participation (AFE).
Sending you the AFE is the last thing the operator wants to do because they need to lease you to make the lions share of the money from your oil.
The operator doesn't want you to participate, they don't want you to be non-consent, they do not drill wells to recover the 50% cost of drilling and completing penalty, the operator doesn't want to make $3,000 per acre over 3-5 years, they want to make $50,000 or more per acre over the life of the well. If you don't lease you have just capped the maximum amount the operator can make off your oil.
It's not unheard of for lease negotiations to stretch out so long that you actually get to see how the well produces before you have to decide which way you want to go
dale robinson said:
What is non-consent ? Does that just mean saying no ? Whats the oil companys recorse if the mineral rights owner wont sign a lease ? Yes Id like to know about all I can about all this . Which section number did KOG drill on ? AFE stands for what ? thx
Kevin said:I would not take that lease. My brothers have interest in 159-97. There last offer was $2500 an acre from an investment company once they had an AFE in hand. They decided to go non-consent. If you want the investment companies info let me know. Kodiak just recently drilled on their section. Also what royalty was offered?
Dale go to https://www.dmr.nd.gov/oilgas/ . Go to GIS map server, on the left there is a tab that says find section. Enter your range etc, from there you can pan/zoom to see what other activity is going on in your area. To the east you will see Kodiak has many wells.
I have rights in 157/99. I turned down $5500 an acre to go non-consent. You will be in good position once your lease expires. Research like mad...and listen to what R W Kennedy has to say. I did.
Thanks ..Think we will wait until the current lease is almost or fully expired and see what comes along .. Do you think its a good idea to contack KOG and Continental about going directly to them at that time ?
Im familiar with well locations but Im sure I cant findout what these owners are getting for leasing per acre or a list of what each well is producing other than watching the dailey activity.Kevin said:
Dale go to https://www.dmr.nd.gov/oilgas/ . Go to GIS map server, on the left there is a tab that says find section. Enter your range etc, from there you can pan/zoom to see what other activity is going on in your area. To the east you will see Kodiak has many wells.
I have rights in 157/99. I turned down $5500 an acre to go non-consent. You will be in good position once your lease expires. Research like mad...and listen to what R W Kennedy has to say. I did.
I wouldn’t. Hess offered me 1000 an acre. As I said investors were willing to pay 5500 an acre. The oil company wants your minerals for dirt cheap. Also I thought my interest would be drilled before the lease expired, but to be safe I researched non-consent and crossed my fingers that the lease would expire. I have kids and did not want to take the bribe/lease bonus. I or my family will benefit more so in 5 to 10 years. Keep in mind if you lease you have no say in future wells. With non-consent you can lease, non-consent or participate in the following wells. To get all the oil out of the 1280 spacing, they will drill multiple.