I recently inherited some mineral rights in McKenizie County:
Township 150 North, Range 100 West of the 5th P.M
Section 29: NW 1\4
Section 30: Lots 3,4, E 1\2 SW 1\4
Well is OLSON 34-19SWH
There is an existing lease that ends in August and am hoping to get some opinions on fair value including royalties. I just received me first royalty statement from XTO. I'm not sure what the rate is, for example gross on gas for Dec-12 was 17578.88 and my gross was 3.05. Oil on Feb-13 was 217267.60 and my gross was 37.80.
I'm not looking to get top dollar, but I don't want to get ripped off either. What are some ballpark numbers for this area? Is this a good area with potential? We've been sent some inquires about purchasing the rights outright, but I haven't seen any figures yet.
Thanks for your time, obviously I'm new at this so any info is helpful. I called an appraiser and they wanted 10k to do a full appraisal and write-up. I'm just trying to negotiate intelligently so I don't think that is necessary.
-Adam
Mr. Schroeder, Are you sure you are talking about Oil Royalty's or are you talking about Natural Gas Liquids and Residue? I receive two checks from XTO One is substantial and the other is usually around 30-40 dollars. The statement in the lower left shows what the columns mean. I am wondering if you are looking at the residue check? Also you say that your lease ends in August. If that is the same lease that they are paying you royalty's on, the lease doesn't mater since the well is Held By Production. As long as the well produces, the lease will never expire until nothing is produced for a year or so. Then it will not be held by production and would cease. Hope this helps somewhat Brian...
Adam, you have a well so you are held by production for as long as that well produces, no more leasing for a couple of decades at least but they may come back and drill you another well in the future. You have a decent well. Offers to buy will probably be around what you would get in 3 years worth of royalty. I wouldn't sell it if I didn't have to and I wouldn't sell it for less than 3 years royalty.
Brian - I'm pretty sure its a royalty - at least according to the legend. I uploaded a copy of the statement in case something doesn't look right.
Thanks for the info guys. I guess I need to figure out exactly what is going to happen. Ever since this went down I was told from people that I would have to negotiate a lease in August, but maybe they understand about as much as I do. :) Could I have a different type of arrangement that would require a lease renewal? Maybe on sections that don't have a well? I'm just throwing ideas out there.
Thanks again for your time.
-Adam
2561-XTOEnergyJune13.pdf (216 KB)
Regarding that statement - I own 25% and 2 others own the rest. If the numbers look low that could be a reason why. The other two have just been signing off on anything that comes to them over the years. I'm trying to do some due diligence to make sure what happens is fair.
-Adam
If you don't have a pugh clause, releasing non-producing lands after the primary term, one well can hold it all.
Adam, after looking over your statement I have noticed differences, In the (btu-factor) column Yours say Compression, On my residue statements the column will say Processing, On my Royalty statements, this column is blank. Strange tho, yours shows G (gas) from 10/of 2012 to April of 2013, But shows Oil from December to April of 2013. My first page is usually just the check page and blank. I am not a math technition affectionado like some on this forum. However the (compression) in the BTU-Factor may be the clue. Hope this helps in some way or other. Brian...
P.S. I as well have two of four that sign anything presented to them. You just cant fix stoopid hahahahah.
Adam, it is the cruel mathematics of leasing. 1. ahead of the decimal is the whole well.
0.1 is one tenth of the whole well
0.01 is one hundredth of the whole well
0.001 is one thousandth of the whole well
0.0001 is one ten-thousandth of the whole well
0.00017 is 17 /one hundred-thousandth of the whole well. You have a decent well and the products are bringing decent prices or you likely wouldn't be seeing many checks. The operator is probably making about 3 times what you receive from your acres. I think you are doing about as well as can be expected for roughly an acre, leased for whatever you leased for. I'm not going to run the equation backwards to get the exact acreage, for such a small amount when you probably already have the answer. Spend it or let it pile up in an account somewhere, I wouldn't sell it because I suspect you would just end up with less in the long run, unless a sale uncomplicated your life enough that you could file the 1040EZ form.