I was sent a lease offer from a landman named Charles A. Doggett. He is from Hal C. Smith and Associates INC. The same person sent me a lease offer about 5 years back and he was from Energy Lease Account LLC. In the lease, he is representing Newfield Exploration Mid-Continent INC. The offer seems reasonable or I should say, that is better than the first offer of $350 a mineral acre and 3/16ths royalties. The new lease offer is $750 an acre and 3/16th royalties.
My portion of rights are 28-6N-4W in Mc Clain Co. The contract includes a 2 year Shut in clause limit. Also a Depth Clause and a Gross Proceeds clause and no rights to well water. But Newfield can use water along with oil gas etc from what they produce, though. They are also asking me to warrent
I would love any feed back, from anyone here and I will also be happy to discuss the contract further.
I would suggest that you read over the last year of comments on the McClain forum and you will pick up lots of good advice and tips. Read the Mineral Help at the top of the page for more good info.
That being said, the current offer is low compared to the pooling in the contiguous eight sections within the last year. $1500 3/16, $1000 1/5, $0 1/4 were the amounts in 22 & 27 in November of 2015, so their offers should match that. Newfield is the operator for those poolings. Do not warrant your title, read that Gross Production clause carefully to make sure it does not have the "less the deductions for....." because that negates it. You need a depth clause, a commencement of drilling clause and a few others. If you want me to look over their lease and show you the clauses that could be improved, you can friend me. But do the reading suggested first and you will feel more comfortable about the area and what is going on.
Thank you Mr. Barnes. I will do as you suggested. I have read some of the comments and have done a little research but there is much, I do not fully understand.
Also, is there an an map of the areas you mentioned with the current activity of leasing, wells, exploration, etc?
James, I have attached three maps for your review. The first map shows leasing activity in all of 6N-4W in 2015. If you look carefully, you can see that Section 28 had 36 leases executed in the entire year. The second map which shows leasing activity in the second half of the year. Note, there were only 2 leases filed of record since July. I suspect the decline in leasing activity is due in part to Continental and Newfield pooling Section 21 but then inexplicably both cases were dismissed in March and May. After that point, leasing declined in the area. The third map I have attached shows recent poolings in the area and the prices and royalties offered under the poolings.
The wells in this area (not shown) have been reporting initial production between 700 - 800 barrels. Let me know if you have any questions and I will try to get back to you.
Hope this helps in making a more informed decision.
Thank you Mr. Story. Yes, the maps are very helpful. I will study them for the next couple of days and look into the wording in my contract, to make sure I understand what is being offered me and also my obligation under the contract terms. I have one question about the dismissal in 21. What does a dismissal mean, in in oil lease terms and do you know why the pooling was dismissed? Also, all the numbers you posted are pooling numbers? And should I look at section 28 specifically for terms and signing bonuses of the individual leases? And at what point does a section get pooled in the process. And just one more question, if I may: Would the few leases since July, reflect the down trend in WTI and Brent prices? Again, thank you very much for sharing your time and knowledge.
I am going to google Earth the area and check for geology. There must be a pattern to their intentions. It looks like 28 has had the most recent leases in the area but that could be because of alot of small acreage mineral owners. Is there a way to see what the total area of a section has been leased?
Geology is not going to be noticeable from the satellite images that google earth provides. Most times, you would need a geologist to tell you what is under the surface and why their geologists are interested in the area.
The number of leases is merely an indication of activity. It is not so much the area that has been leased in a unitized area, but the percentage of net mineral acres that has been leased that is important. It is possible that one mineral owner owns all the acreage under an entire section, in which case there would only be one lease filed of record. There are however norms and trends that we can look at. The only way to know for certain is to run the mineral title to the entire section and figure out who has and has not leased yet to determine the available open acreage.
I am on the road today, so I will have to answer your other questions in the above post when I get back later in the evening.
I will try to answer your questions in the order in which you stated them.
The dismissal means that the two competing companies being Continental and Newfield retracted their attempt to pool the section. Any lease that is still in term is still in effect. Anyone who had not leased that was named on the pooling is still open of record. This effects leasing in the area because those that were willing to invest their funds in the hope of participating in a well would rather focus their attention on areas that will have a well drilled on it in the near term. I would not know why the pooling was dismissed unless I looked into the record. It may simply have been that with their drilling schedule they did not believe they could drill the well before the one year to do so had expired, in which case they would need to pool and pay everyone again.
Yes, those numbers are pooling order numbers. You can pull up the individual pooling orders by visiting http://imaging.occeweb.com/imaging/OAP.aspx and entering those order numbers.
I would look at the general trend across the area instead of a single section for bonus prices. As for terms, in this area, if they are about to drill a well, feel free to add all the lease terms that M Barnes has no doubt suggested to your oil and gas lease. This should not decrease your bonus per acre, ignore any lease hound that tells you otherwise.
To accurately answer that question would probably require a novella. Suffice to say, before they drill a large unit well, they generally are required to pool the acreage covered by the unit. Due to the cost involved and the comparatively short time table to drill under a pooling order, pooling orders general indicate serious intent on the operator's part to actually drill a well.
No, the few leases since July do not reflect the down trend in the WTI and Brent prices. For example, in Grady County alone, between the months of January 1st, 2015 through June, 30th, 2015 there were ~1,600 leases filed of record. In the months from July 1st, 2015 through January 1st, 2016, there were ~1,800 leases filed of record. I see little to evidence a correlative association between the drop in WTI prices having an affect on leasing activity in Grady county over that period. If lease buyers backed away from your section it likely had more to do with the pooling and drilling activity.
Yes! It is extremely helpful and I am very grateful for your concise and timely response. You and M. Barnes are knowledgeable and gracious with the information. I hope to be a good steward, of what I learn from you both.
It will take me a few days to soak in the information.
Recent offers for school land in this township have been between $1300 and $2500 per acre with 3/16 royalty. Poolings last year went for $1200 to $1600 in this township but now are in the range of $800 to $1300 for 3/16. You can also go for a different royalty. The maximum probably would be 1/4 but with no cash consideration. Section 27 pooled for $800 at 3/16.
I am not sure if I understood you correct Tom. Hal C. Smith corporation is sending fake pooling orders? And then Newfield is sending out a real one? I had a couple of calls recently from Hal C. Smith but never returned the calls. Thanks for your information and if you have any more I would love to hear it. I havn`t received anything by mail recently.
You are correct. Hal Smith & Associates will send out well proposals from the operator. The mineral owner is free to accept one, negotiate something else or wait for the pooling.
Hal C. Smith is contracted by the potential operator to send out lease offers and the notice of the well about to drill. They may send a cover letter about a pending pooling (not sure I would call it fake until I actually saw one), but the only truly official notice comes from the OCC through the potential operators. The only true orders come from the OCC, usually mailed by the operator. On rare occasions, you might get two poolings on the same tract by two companies. The OCC will determine "who gets it".
Tom, if you got what I think you might have received, it is only an offer and not the actual OCC orders. It probably had a cover letter, an AFE and a set of options to choose. Quite often those are the actual numbers that will be offered at pooling, but not always. Wait for the actual one from the operator. Remember that you only have 20 total days to respond. That counts weekends and mailing time, so get on it quickly once the actual orders arrive.
