Daniels County

Shales Bakken Shale
1

I have received an offer from Shale Exploration for $150/acre, term is five years with 5 year option @$300 per net mineral acre. 1/8 Royalty. Does anyone know if this is a fair offer? The minerals are in Daniels County- 160 acres - SE1/4, Section 27, TS 33 North Range 44 East.

Thanks

Sandra

2

Sandra, I'm still a "newbie" but the bonus and royalty % both sound low and the lease term long. I'd hold off for the moment. Hopefully some of the pros will weigh in here and give you some up to date figures.

Andy

3

Sandra:

I'm not sure about the bonus/acre in regards to whether this is a fair rate but I would not consider any lease over 3 years and no extension would be negotiated. The royalty on the lease would be a minimum of 18%. Funny, they are willing to go $300 on an extension option. Do not let this lease broker tie up your mineral assets at low rates in both royalty and bonus amounts.

4

Thanks, Charles and Andy. I would love to hear from someone who has actully cut a deal with Shale. Patience.

5

Sandra:

Looking at the past State Mineral Auction site, it appears that Shale paid $76.00/acre during the September 2011 sale. The area was T37N;R43E;Section 4. There is only one section in Daniels County on the roster for the June 2012 sale. Looking at the low price paid in 2011 and your offer of $150/acre, indicates that things may be setting up for developement in this County, especially looking at the $300/acre for an extension option. I would hold off leasing for the present time and watch what happens in the way of drilling activity in this area. It could mean that your bargining level will be raised substatially especially if developements beging to occur.

6

Sandra,

First of all, I'm very glad to hear you received an offer in 33N 44E. That is much further west than any previous lease activity I've heard of in Daniels Co. Getting any offer there (sw corner of county) is a very positive sign. It says the area of interest has expanded! Doesn't mean there will be oil there but at least someone is willing to risk some money that there might be. Now regarding the specifics of your offer;

$150/acre seems a reasonable bonus (currently) in your area (so far from current drilling).

Though 1/8th (12.5%) royalty is too low. Shoot for 18.75%, and don't go below 16.67%.

Three year leases are always best. Yet in this wildcat setting five year lease is not unreasonable, and it will likely take a few years before any drilling extends over there.

However, extension options are never a good idea. A FIVE year extension especially so. Just say no to any extension. Tying up minerals for ten years is not in your best interest, period.

As to Shale Exploration, I've never dealt with them. Yet they are for real and are actively trying to sign leases within the county. For what it's worth, Shale Exploration just gave a $100,000 plus to the Scobey school system for computers. Ultimately, you face the typical dillema of a mineral owner "lease now, or wait and hope for more later?" I don't know that there is a correct answer. Just follow your instincts. If you ultimately decide to lease now insist on no extension option. Good Luck.

7
  • In Feb. 2012, my family received an offer from Shale Exploration in Daniels 34N-44E Sec. 7&8, $150/per MA, 5 years, 1/8th RI. we have 20 ma total, the offer only went to half the family. I don't know if they accepted.
8

I have no personal knowledge or experience with Shale Exploration. However, do a search of them on this board there have been several posts/discussions about this company. You'll see in some of these posts where Shale Exploration did not pay the signed leases as promised. That is enough for me to be leary. I am not saying don't sign with them. But I am saying, be cautious and know what you are getting into. I always suggest working with an experienced gas/oil atty as well.

In addition, do not provide your signed lease until you have "cash in hand" (i.e. a cleared check in your bank). Do not accept bank draft, sight draft, letter of intent, Order for payment (OFP) or any other similar payment method.

Good luck,
Wilson

9

Sandra, I too am a "newbie" to all of this. We recieved a lease offer from Shale Exploration in late april of this year, T37N R43E which is in the established Bakken field, yet really extensively unresearched in Montana. The 150.00/300.00 was low by my figguring, but the real deal killer was the 1/8 (12.5%) , that compounded by the 5 year primary, sealed the deal with the rubbish container. I have recently signed with LoneTree, 3yr,18.75 in a way different area... Montana is moving along, just a little behind ND....... all I can say is wait for it, wait for it..... just my two cents...