My wife was cold called by a landman yesterday. They had been sending documents to our address, but they were addressed to the past owners. We don’t ever open their mail and “return to sender”. I honestly don’t know how he got her number and not mine, but that’s fine…
We agreed to meet with him yesterday afternoon. As I prepared for the meeting, I found this website, did a bit of research on RRC website, looked up production from wells and units in the area, etc.
I need some help making sure the offer is good or not. I see a lot of threads on lease terms, but I know market is a bit fluid.
Offer is from Midland-Petro D.C. Partners, LLC
Also, it has PERMIAN DEEP ROCK OIL COMPANY on the letterhead. DEEP ROCK is the one drilling the wells. It looks to be a standard non-surface use, 3 year lease. He is offering:
$10,000/nma
1/4 royalty
Cost free language
I have a house with 0.278 acres inside of the Midland city limits. It’s a section that was previously undrilled. I received mineral rights during purchase of the home in 2020. It looks like it will be drilled from the north up by the recycling center. He said they are already drilling in the unit, but starting on the east. My property is on the west. They also drilled up from the south to Cuthbert. I looked at production through those wells and units, and they seem to produce rather well, but I’m a bit worried if some of “my” oil and gas could already be gone as a result. Wells end like 0.2 miles to the south.
North unit: Knight 155 MIPA H155WA 46099
South unit: Mustang 155 MIPA H155WA 44953
It would be very wise to get a good oil and gas attorney in Midland to look at the draft lease. *If you can find one that has time… The lease can hold your family for decades and you can see that multiple well bores are possible, so a significant lease to get the best terms on. The wording of the clauses is critical. If you cannot find an attorney in Midland, then there are several listed in the Directories tab above.
Thanks. I reached out to one. I actually had to take classes on this to get my MBA at TCU. It’s just not something that I normally do in my day-to-day role as an engineer.
I don’t want to overwork this too much since it’s a small lot, but I don’t want to be taken advantage of either. Are the bonus and royalty on-par with the area? It seemed like MRT said that the Airpark got a bit higher bonus at $12,500 per nma for this block of wells.
To clarify, I have no interest in the acreage to the south, but I am looking at the productivity out of those wells to know what to expect from the ones in our area.
fwiw, $10k/nma is low for Midland county in general for lease bonus. But once you start talking about quarter acre bites their fixed costs start to eat into things. I doubt anyone is stealing much from you. They are probably stealing a little from you if you accept the first offer anyone gives you. But pretty much everybody is always stealing from somebody. So, sure, like Martha said ask for more. But it’s 0.278nma. There is definitely less than $1k net to you in play on the bonus. So maybe use an attorney sparingly.
You are taking 0.278 nma and converting it into a lease bonus plus 0.556 nras (@ 25% roy) of future royalty income.
If they drill all of this up with 20 wells per section you, each well will probably make around 400kbo in 10 years. 20x400000x$70/(1280*8) = $55k/NRA to royalty owners.
Bonus would be $10k-15k : or $2800 to $4200
Roy would be : $30000 (over 10 years)
Just for some perspective.
I doubt any meaningful portion of your unit is drained from toe fracs on offset units.
The city of Midland has been an untapped basin up until a few years ago. Now that the moratorium has been lifted, they are starting to drill like crazy. @M_Barnes is right - you’ll likely get one shot at this lease and it will hold your assets indefinitely. It never hurts to ask for more. Every paragraph in that lease is up for negotiation. The lease is up for negotiation. If they don’t like your terms they can always say no. But you’ll never know if you don’t ask. We’ve got some great webinars on the NARO website that could help you out. They are free to watch if you are a member. Just some food for thought.
