My family inherited the mineral rights to 160 acres in Dunn county at 145n-93w-33nw and this acreage has been leased for the last 5 years to Marathon oil. They have recently decided to let the lease expire in May of 2014. There seems to be some activity in the acreage bordering this property. What are the prospects for interest in this property from other oil companies? Slawson Exploration competed for this lease the last time and they have been drilling on the neighboring property just to the east of us. Any suggestions of what we should do?
While not the absolute best area, there is fair to good production all around you. Someone should want your minerals. Slawson has a permit for a second well in section 34, next to you. I would advise patience. It's not just your lease which must expire, the majority of the leases need to be open for another operator to become very interested. The more leased acres the operator holds, the greater the profit they will make. I think Slawson would be interested in your property as soon as the greatest part of the spacing is open to lease or is already leased to them. Just be patient. It may be a couple years for the spacing to open up and a couple more years before someone drills, it's the way the oil business works.
Thanks for the reply…the guy from Slawson Exploration told me that he didn’t think That Marathon was very interested in drilling although they had drilled a lot nearby… maybe they weren’t getting the results that they wanted or maybe more profitable plays were elsewhere…we went with Marathon because their bonus was a little higher but maybe that was a mistake.
r w kennedy said:
While not the absolute best area, there is fair to good production all around you. Someone should want your minerals. Slawson has a permit for a second well in section 34, next to you. I would advise patience. It’s not just your lease which must expire, the majority of the leases need to be open for another operator to become very interested. The more leased acres the operator holds, the greater the profit they will make. I think Slawson would be interested in your property as soon as the greatest part of the spacing is open to lease or is already leased to them. Just be patient. It may be a couple years for the spacing to open up and a couple more years before someone drills, it’s the way the oil business works.
This property was last leased in 2012 to Marathon oil for $1000/acre/year 3/16 royalty on a 2 year lease. They did not renew the lease upon expiration. It has not been leased since then. We recently were offered a lease of $100/acre/year on a 5 year lease from Lincoln Energy at 3/16 royalty. They say drilling will be within 2 years. This seems to be a low ball offer and too long of a lease. I see a couple of new wells have been drilled nearby recently. We declined the offer and they came back and said to make a counter offer. Any thoughts???
William, First I’m not super familiar with your area but in general terms $100/NMA seems low (assume that would translate to $500 for a 5 year lease), especially if they say that they feel that a well would be drilled in 2 years. I believe that Lincoln Energy primarily buys/sells minerals and leasehold interests so it would likely be a different company that would operate (although that could change).
I would at least try to lease for more than you did in 2012 ($1000/nma @ 3/16). While Marathon might not be active in the area, it does look like their are several other companies who have permitted wells in Dunn county in the past year. I would try to proactively contact them to see if they are interested in leasing. If you can stir up some competition, it usually means to can use it as a bargaining chip to get better terms.
I have a podcast episode that we just released this week that covers negotiating an oil and gas lease in more detail and a few of the key clauses to look out for.
Good luck! Matt Sands Mineral Rights
Rw Kennedy???