Joel, you make me feel better, I hadn’t thought of inflated drilling cost in the terms of 4% per year. Thanks for opening up my tunnel vision. I was looking at the fact that wells are are around 9 million + due to inflation and supply and demand and more expensive and extensive completion services that have become the norm. I am not a big fan of the long 2 mile lateral. 2 mile laterals produce great at first when they are under natural pressure, but when you have to pump them, production falls off rapidly. I don’t think you have to be an engineer to understand that when the pump starts sucking oil from the ground, that every drop of oil/water you get in the first mile reduces the pull exerted on the second mile. I don’t have hard numbers that the second mile costs the same to fracture/ stimulate as the first, but I think it probably does, and will produce far less oil than the first mile over the life of the well. The 2 mile lateral does one thing really, really well that a 1 mile lateral wouldn’t do. It holds twice as much land by production. In the well proposals I have received the stimulation service, propants and water needed for a 2 mile lateral are easily 40% of the cost to drill and complete to the point of producing oil a well with 2 mile lateral. That second mile of lateral might only produce 20% to 30% of total well output, and most of that from when it was under natural pressure. Has anyone else run across similar information? I will second Mr. Bye in wishing everyone a Merry Christmas.
Joel, they have plugs that wedge themselves in the bore that can be released and removed, so you can get the maximum pressure on a small area, at least that’s my understanding. I think the space between the plugs is one “stage” and the more stages the smaller area you are working on at one time and the more force you can exert, hopefully pushing the propant deeper in the cracks so the oil can flow more freely. If I have this wrong someone please tell me. It may make no difference to me but I find it interesting!
Joel:
I have been away from my computer for a few days but reading your posts over the past several days, it appears that you have questions regarding the horizontal drilling technique. If you will google “Northern Oil & Gas Video” and scroll down to "Hoizontal Video>>Oil and Gas Returns…You can view a short film on what occurs under the surface during a horizontal drilling operation.
Thanks to Greg and Charles for providing some good explanations for all of us. Hre’s to a great new year!
Joel: In regards to your question about what determines the number of frack stages, the down hole studies of the formation, seismic tests, etc. have a major impact on making these decisions.
I should have said add to cart instead of buy in my post below, although if it’s something you think you will look at more than once, I find it worth $1 to download the first page. Many are 2 pages and would cost $2 but often the second page is just for the notorization and the county recorders stamp, I haven’t found a use for those yet.
NDRIN does not give any numbers just the term of the lease
In three months or so I will have the data on what Reef paid for leases on the Bakken reserves.
Joel, a $25 one month subscription to the NDRIN recorders network and surfing the web a couple hours would probably give you a better idea of what people have gotten in your area for bonus and royalty. The caveat you mention for that US Lease price report looks alot like use at your own risk. I’d expect alot more out of $270.
Ndrin will allow you to see the actual lease (preview function, buy, prewiew, then cancel if you don’t wish to download it) which will show the royalty %. True that the signing bonus is much like a side transaction and will not show up on the lease. I don’t find a lack of bonus information to be a handicap, especially bonus information that could be long out of date. I did say that you would also need to surf the web a couple hours to come up with an idea of what people were getting. I should have been more clear about that. I consider the royalty % I see when looking at the NDRIN in an area to be the “floor” of what I would ask. Also look for memorandum of lease, these disclose no information other than that they don’t want anyone to know what the agreement was. I think it likely that they gave better lease terms and don’t want these terms to become the norm. To paraphrase Buddy Cotten, these may be people you can work with. There is no one stop shop in setting the value of your minerals and what you should negotiate for. I have had the NDRIN subscription for over a year, and it has been valuable to me in many ways, you can make an estimate of how much of your spacing is leased by looking at the leases, you can see when the majority of the leases will expire. Have you noticed the lessors address is on the lease? You might write them (send a self addressed stamped envelop), explain that you own minerals in the spacing and are trying to figure out what bonus is in the area. Ordinary people are alot less secretive than oil companies. I consider a 1 month subscription to be a bargain for these reasons alone. Much better than $270 per year for access to information that has such a massive disclaimer as the Lierle. I wonder how Lierle is setting the bonus amounts ?
Brandy:
I’m not too familiar with Blaine County as my minerals are located in both Roosevelt and Sheridan Counties but looking at the previous State Mineral Auction which was held December 6, it appears the bonus amounts was $7.00 and $9.00/acre. The areas were T34N;R17E;Section 36 and T35N;R17E;Section 36. These amounts are most likely higher than what you will recieve as bonuses in State Auctions tend to be higher. These low bonus amounts tells me that at least this area of Blaine County is undeveloped but who knows what the future holds in regards to drilling operations. Currently, mineral owners in Richland, Roosevelt and Sheridan Counties are waiting to see if the drilling migration enters these areas (on a large scale) in 2012. Some areas in these counties are slowly becoming de-risk but the process has been slow due to several factors such as lack of rigs, weather extremes and tranportation difficulties. Your alternatives would be to wait until the area begins a developement or market your minerals at a low bonus rate.
Im a newbie… What is the bonus about?
Is any of this into Blaine County Montana? I have 1600 acres and its time to lease. I do not know what to do. I inherited the mineral rights and here I am 4 months later trying to figure out what a fare lease is… Help?
Brandy:
Just take your time and study up on all this and don’t let it overwhelm you. I have been leasing and studying this stuff since 2004 and still have alot to learn. This forum is one great study guide if you watch what others ask and read the responses. It will take you time and experience but you should be fine.
Brandy; Charles is correct. You have time. Don’t make any hasty decisions. I have had potential lessees double their bonus offer and raise the royalty percentage 10% because I simply didn’t respond to them.
I was told that I would lease the rights per acre at a dollar amount per acre. 5 years ago my family was paid 12.00 per acre. I am trying to educate myself as much as possible So is BONUS the amount per acre?
Brandy:
The “bonus” refers to the dollar amount per acre that is paid to lease someone’s mineral interests. There are several important parts in a lease including this “bonus” amount, the % royalty and the length of the lease. Other items to consider in a lease is the “pugh clause” which will release any unexploited formations above and below the producing zone. You might want to “google” pugh clause for a more in depth definition. Also, if you want to check past State Mineral Auction rates for Blaine County, you can google “Montana Mineral Management” and scroll through the past lease auctions. Also, being a newbie, you might want to go to the top of the page and click on “Mineral Help”, where there is some good info about leasing. Hope this helps.
Thank you Charles for the info. It’s nice that you are kind enough to be helpful. I’m rather scared of the whole process!
http://www.aapg.org/explorer/2011/04apr/3forks0411.cfm
some reading about the formations