We received a lease offer from Dynamic Resources. $30.00/acre and 14% of production. 5 year term. Anyone know what fair offers are for the area?
Township 151 North, Range 89 West Section 27
Graig,
If you are out east near Ward county, the lowest offers I've seen are huge multiples of that offer. Like RW says, a legal description on MRF will bering you some pretty good advise about current rates.
Craig, I don't think anyone is going to have information on recent leases in your immediate area. There was some Madison formation production that was close to you in section 23. I think I would try to improve on the royalty aspect because ND production and severance taxes plus income taxes added to post production costs deducted from 14% which wasn't that high to begin with might leave you shaking your head why you even bothered in the first place. Should they actually drill and complete a well without leasing you, you would receive the weighted average of whatever anyone else in the spacing leased for or 16%. I would be tempted to make that my bottom royalty amount and if they won't go for it, maybe the price of oil is just not high enough yet. On the other hand they could be pure speculators and a well will never be drilled in which case it's free money missed. I don't know how much or how much you need it. I hope what little I could tell you helps but I know it's thin.
Thanks for the information and the advice! There is a lot of activity in our area so I think simply being patient is a good option.
Craig.
You are near the corner where Mountrail, Ward and McLean Counties converge. There was an 8000 ' test of the Madison formation in your section in 1980's and a mile northeast are a couple of tests that produced from the Madison. One went to 13,000 feet so the geology is well known in your section. Your section is crisscrossed with seismic lines and well within the Bakken- Lodgepole deposition limits. I agree with RW that a short term lease with no extensions or rights to extend without economic production would generate a little cash. Personally, I would let it sit. Any lease you get today will cost some legal or other expert advise to protect yourself and it may not be worth it. Patience is the key but make certain you register your mineral interest every few years so it isn't taken away from you. If you also own the surface its no problem.
Craig Tessem said:
Township 151 North, Range 89 West Section 27
Craig,
Dynamic Resources offered us the same deal: $30.00/acre and 14% of production. 5 year term.
Our area is:
157N Range 88W Sections 7 and 18
157N Range 89W Sections 14 and 23
154N Range 88W Sections 11 and 12
153N Range 88W Section 14
When I questioned our contact at Dynamic on the low $30.00/acre offer this was his response:
He said that our area would be Mission Canyon fields East of the commercial production of the Bakken Shale, where the formation pinches out, known in the industry as the "line of death".
Have you heard this term before?
He said that East of this line, the industry has determined that the Bakken, if present, is noncommercial. As a result, exploration for Mission Canyon production is a conventional play are carries much higher risk with lower return on investment than Bakken.
I don't know anything about the area so I welcome any feedback to determine if this sounds reasonable or is it landman crap.
Thanks,
Greg
I got the same line of death story.
If you check the state of N.D. website for active oil rigs, https://www.dmr.nd.gov/oilgas/riglist.asp all of the rigs in Mountrail county are identified. There are two rigs near my rights pumping around 1500 barrels per day. If you search a bit further you will find out they are listed as drilling in the Bakken formation. The state geologist calculations also indicate there is nearly as much oil in Montrail County as in McKenzie.
So the question is, if there really is no viable oil east of the line of death why are so many oil companies drilling there?
99.5% of all fracking wells hit oil. The only question is economic viability.
I am going to talk with Dynamic Monday next week about the business terns of the lease offer. My belief is that the $/acre is off by an order of magnitude. It would need to be in the $300/acre to make sense. The share of oil needs to be in the 20 to 25% range. A 3 year term is reasonable 5 is not, niether is a lease extension for another 5. Remove the language about marketing expenses, no "gas for equipment" unless it is paid for, and add a Pugh clause.
We think Dynamic is a landman acting on behalf of someone else.
I am willing to wait until someone else makes an offer before signing a bad lease. We have minerals in the Niobrara formation in Colorado. Last year we said no to the first offer on the table, $30/acre and 1/8. Now we have an offer for $500 1/4 and that is low relative to others nearby.
The oil is not going anywhere and patience is rewarded.
Greg Berglind said:
Craig,
Dynamic Resources offered us the same deal: $30.00/acre and 14% of production. 5 year term.
Our area is:
157N Range 88W Sections 7 and 18
157N Range 89W Sections 14 and 23
154N Range 88W Sections 11 and 12
153N Range 88W Section 14
When I questioned our contact at Dynamic on the low $30.00/acre offer this was his response:
He said that our area would be Mission Canyon fields East of the commercial production of the Bakken Shale, where the formation pinches out, known in the industry as the "line of death".
Have you heard this term before?
He said that East of this line, the industry has determined that the Bakken, if present, is noncommercial. As a result, exploration for Mission Canyon production is a conventional play are carries much higher risk with lower return on investment than Bakken.
I don't know anything about the area so I welcome any feedback to determine if this sounds reasonable or is it landman crap.
Thanks,
Greg
The spokesman for Dynamic is pulling your leg, to be as kind as I can. Some of the finest geologists I know strongly disagree with this crap because the facts are there to tell the real story.
Greg Berglind said:
Craig,
Dynamic Resources offered us the same deal: $30.00/acre and 14% of production. 5 year term.
Our area is:
157N Range 88W Sections 7 and 18
157N Range 89W Sections 14 and 23
154N Range 88W Sections 11 and 12
153N Range 88W Section 14
When I questioned our contact at Dynamic on the low $30.00/acre offer this was his response:
He said that our area would be Mission Canyon fields East of the commercial production of the Bakken Shale, where the formation pinches out, known in the industry as the "line of death".
Have you heard this term before?
He said that East of this line, the industry has determined that the Bakken, if present, is noncommercial. As a result, exploration for Mission Canyon production is a conventional play are carries much higher risk with lower return on investment than Bakken.
I don't know anything about the area so I welcome any feedback to determine if this sounds reasonable or is it landman crap.
Thanks,
Greg
Good stories need an element of truth in them. It appears that nobody has had success in the Bakken and three forks as far east as your legal descriptions. That is not the same as saying there is no oil. The oil companies have become spoiled. They know the area where there is possibly 1 chance in 1,000 that they will not find oil and they know the area where there is not more than 1 chance in 100 that they will not show a profit. Then there is your area where, with no success in the Bakken or the TF they once again have to work for it.
You are being offered the company line because there is enough acres to drill for the next 20 years and they don't think they need you. They think that to step out of the comfortable 99% + success rate area they need to get paid extremely well. In 2007-8 they probably came to you hat in hand because they didn't know where the best spot was, in 2013 they want to dictate terms, just because there is not a 100% sure thing.
I don't believe there would be enough upside for me to sign the leases I have heard offered in this area.
Remember a bad lease is much like a bad marriage, with the difference that in a bad marriage a judge may take pity on you and grant a divorce, that won't happen with a lease.
Greg Berglind said:
Craig,
Dynamic Resources offered us the same deal: $30.00/acre and 14% of production. 5 year term.
Our area is:
157N Range 88W Sections 7 and 18
157N Range 89W Sections 14 and 23
154N Range 88W Sections 11 and 12
153N Range 88W Section 14
When I questioned our contact at Dynamic on the low $30.00/acre offer this was his response:
He said that our area would be Mission Canyon fields East of the commercial production of the Bakken Shale, where the formation pinches out, known in the industry as the "line of death".
Have you heard this term before?
He said that East of this line, the industry has determined that the Bakken, if present, is noncommercial. As a result, exploration for Mission Canyon production is a conventional play are carries much higher risk with lower return on investment than Bakken.
I don't know anything about the area so I welcome any feedback to determine if this sounds reasonable or is it landman crap.
Thanks,
Greg
Craig,
My Grandfather owned minerals that were vested unto my siblings and I after he passed away that sit in Mountrail County.... I too have been contacted by Dynamic Resources and are in the middle of negotiations with them for our minerals that are located inside their "future drillsites" as are my brothers and sisters. Needing some advice from the locals in this area about this lease offer we have received. My sister is an attorney in Oklahoma who deals specifically with oil and gas leases and is in the process of reviewing Dynamic's paperwork. Have you made any negotiations with this company?
r w kennedy said:
Good stories need an element of truth in them. It appears that nobody has had success in the Bakken and three forks as far east as your legal descriptions. That is not the same as saying there is no oil. The oil companies have become spoiled. They know the area where there is possibly 1 chance in 1,000 that they will not find oil and they know the area where there is not more than 1 chance in 100 that they will not show a profit. Then there is your area where, with no success in the Bakken or the TF they once again have to work for it.
You are being offered the company line because there is enough acres to drill for the next 20 years and they don't think they need you. They think that to step out of the comfortable 99% + success rate area they need to get paid extremely well. In 2007-8 they probably came to you hat in hand because they didn't know where the best spot was, in 2013 they want to dictate terms, just because there is not a 100% sure thing.
I don't believe there would be enough upside for me to sign the leases I have heard offered in this area.
Remember a bad lease is much like a bad marriage, with the difference that in a bad marriage a judge may take pity on you and grant a divorce, that won't happen with a lease.
Greg Berglind said:Craig,
Dynamic Resources offered us the same deal: $30.00/acre and 14% of production. 5 year term.
Our area is:
157N Range 88W Sections 7 and 18
157N Range 89W Sections 14 and 23
154N Range 88W Sections 11 and 12
153N Range 88W Section 14
When I questioned our contact at Dynamic on the low $30.00/acre offer this was his response:
He said that our area would be Mission Canyon fields East of the commercial production of the Bakken Shale, where the formation pinches out, known in the industry as the "line of death".
Have you heard this term before?
He said that East of this line, the industry has determined that the Bakken, if present, is noncommercial. As a result, exploration for Mission Canyon production is a conventional play are carries much higher risk with lower return on investment than Bakken.
I don't know anything about the area so I welcome any feedback to determine if this sounds reasonable or is it landman crap.
Thanks,
Greg
My grandad bought minerals all over the country and he tried to educate me on it before he died. I know some, but not much. I finally got an offer on these minerals in Mountrail County from Dynamic Resources. I've heard a similar story like the others from the landman handling my lease. I just don't know what to think about it because the offer is low, but I want my minerals drilled. The last guys promised to drill, never did and no one has contacted me to lease these minerals in quite some time. I will have to pull my files to see when it expired. I'm just up late contemplating this lease. Any thoughts are appreciated.