Brand new mineral rights owner, and received my first call from a landman from Stockyards Energy Land Services. This is literally my first experience with any of this. I’m looking for all advice I can get. I ordered the book “Money In the Ground” as recommended reading by this forum to help as well.
Got an offer and want to get the smartest deal possible. Offer was 1/4 royalty with some money per acre, 3 year lease with 2 year option. Which sounds best case scenario for royalty.
Any guidance will be much appreciated. I’m wanting to talk via this forum, or phone call, and meet people that have an understanding of this.
Thank you to anyone that can steer me in the right direction.
There is a horizontal play developing in the Cherokee under the Marmaton.
Personally, I would not do any lease with a two year option. Too much power to the lessee. it would be very wise to have a good oil and gas attorney review the draft lease. You do not want any post production charges (among about 10 other clauses that need to be checked.) You are looking at a legal contract that can hold your family for decades, so get good legal advice. An investment now in professional advice can make you money in the long run. Free advice on the forum may only be helpful (or not) up to a point.
Yes, the higher royalty is a good idea if the wells are successful.
Hi M Barnes, first off thank you for responding.
What do you mean by a “horizontal play developing in the Cherokee under the Marmaton?
I’m learning that they are both layers of formations of different substrate that occur at different depths? Are you saying a horizontal well?
As I stated before, I’m really new to this, so my apologies for ignorance. By not giving the lessee the two-year option, is that presuming that the well performs really well so after three years I might be able to still get a 1/4 royalty but with a substantial acreage signing bonus?
I know it’s speculation but, do you really think I’m sitting on the possibility of decades of big money? What makes you think that?
Thanks,
-Jake
Sir there is a lot of information on utube about different drilling methods, never take the first offer , also these men and ladies on here have decades of experience, as far as getting rich , that brings a whole set of new problems, I sure wish you luck , it all depends on how long it take the oil and gas to go to market, sure you get a big check, but then it will slowly go down, just make sure that you get paid the same day you sign the lease! No drafts !! Paid that day ! Again I wish I could be more help ! Other will chime in !
The current wells in 26-13N-24W were vertical drilling from the 1970’s and 80’s into the Cherokee formation. The new play in some parts of Roger Mills is for horizontal drilling in the Cherokee to capture further reserves.
The two year option is only applicable if nothing is done in the first three years. If the well is drilled in the first three years and is productive, the two year option is not relevant. I do not like those options as they frequently limit the bonus given which may or may not be competitive in the last two years. I prefer to lease at the current market rates when the time comes. Sometimes they are higher, sometimes lower. Once the lease is negotiated and there is production, no more negotiations are allowed until the end of the lease’s terms.
Horizontal wells perform differently than vertical wells. They generally come on strong in the first few months and then decline quickly, and can last for decades at low rates of production. “Decades of big money” is not so likely unless there is additional infill drilling. The shape of the production profile looks like a hockey stick with the blade being the big high early production and the stick the long years of lower production.