Hunt oil has a well that includes my family's minerals. The spacing unit is 1280 acres and we own (three of us) 1/4 of a NW section. When Hunt contacted me and asked if I wanted to participate, Hunt said my share of the oil well cost was 1.4% of $9,200,000 or $120,000 (same for my two brothers). They have just sent us a division order saying share was .00016604. We did not lease so we kept 100% of our royalties.
I'm confused how we could owe 1.4% of the sunk cost but only a tiny decimal of the revenue.
Maria, if you did not lease and you did not send them a check to participate, the operator must pay you the average weighted royalty in the spacing OR 16% whichever he elects until the cost of drilling and completing the well are paid off, plus the operator may ask for a 50% risk penalty of the cost of drilling and completing the well.
Maria, there is a mistake somewhere, either you and your siblings do not own 100% of the rights to that 1/4 section or on Hunts part. If Hunt was asking you for 1.4% of the well cost in a 1280 acres spacing, then Hunt probably believes you have about 17.92 acres. You might check your papers.
Pete, that would be a plain vanilla Bakken well. 7-8 million would be a cheap one. Pretty near the top of the line or with difficulties 14 million can be found. There is alot of $.38 cents a pound imported ceramic propant going into some of those wells with up to 40 frack stages. It's expensive but it pays dividends to go all out in better areas, at least by my observations of some thousands of wells.
Thanks for your inputs. I did re check my numbers and I'm pretty confident that I own 13.34 net acres of a 1/4 section - My 2 brothers and I own 1/4 share of 1/4 section ( 160/4 = 40/3= 13.34 net acres. The spacing unit is 1,280 acres so our % ownership is 1.4% (13.34/1,280 = .014 or 1.4%. This number has been confirmed by several landmen/oil companies who have offered to lease our minerals over the years.
We did not lease our minerals to Hunt so we should be getting 100% share of royalties after well and penalty cost recapture. Still can't make the Hunt Oil decimal of .00016604 convert into our correct ownership.
Maria
r w kennedy said:
Maria, if you did not lease and you did not send them a check to participate, the operator must pay you the average weighted royalty in the spacing OR 16% whichever he elects until the cost of drilling and completing the well are paid off, plus the operator may ask for a 50% risk penalty of the cost of drilling and completing the well.
Maria, there is a mistake somewhere, either you and your siblings do not own 100% of the rights to that 1/4 section or on Hunts part. If Hunt was asking you for 1.4% of the well cost in a 1280 acres spacing, then Hunt probably believes you have about 17.92 acres. You might check your papers.
Ok my post didn't seem to make it, the short version is that it doesn't make sense to me either Maria. I tried working it backwards and forwards and it wasn't even close. I think you will have to ask the operator how they arrived at that figure.
Pete, I have a well that was only 24 frack stages, supposedly all ceramic propant, went exactly as planned and they tell me it cost 14.5 million dollars, almost 7 million of that was completion cost. I don't believe them myself and there will be an audit. I have another well that was drilled in early 2010, probably fracked with beach sand, 10 stages, cost 5.1 million dollars, just a minimal well because they really needed one, the leases were expiring and the operators leasehold was evaporating and soon they might not have been the one to drill the spacing.
Thanks for all of your help! The Hunt Oil calculation is during the sunk costs and penalty period where we only get 16% royalties but the decimal is off. My figure above was wrong too - I own 1.04% of the drilling unit (13.34 net acres out of 1,280) = 1.04%
The decimal is calculated as 13.34/1280 x .16 = .0016675
Chesapeake sent me 5 DO's and two P-12's, all wrong. The ratification papers had mistakes as well. Figure out the percentage yourself, email it to them, see if they correct it, ask for it in writing, then go "upstairs" from there. I called the CEO of Chk and actually had it corrected by someone. I believe these are stalling practices to keep your money just a bit longer. I could write a book.