There are numerous producing horizontal gas wells in the area of your minerals. The Austin Chalk and Eagleford formations are the targeted formations in this area. Some of the operators in the area are Stroud Oil Properties, Union Pacific Resources, Enervest Operating and S M Energy.
Dyson Energy has an approved permit for a horizontal well in Section 5/A-7 as of April 13, 2017 to drill into the Austin Chalk formation. These are decent gas wells with condensate.
Mr. Liles is spot on. Although gas wells they’re producing oil which is the end goal. 21.5% is a red flag. That will be flipped to the operator at 22.5 or most likely 25%. You deserve 25% royalty and the bonus difference. The Landman is looking for a 3.5% overriding royalty which is likely split between multiple middlemen. We own in Washington Co so I’ll find out what the royalty and bonus is going for.
Clint is spot on with the Austin Chalk. Protect your depths. A good gas well can produce heavy condensate that equals oil that equals dinero. So many these days pass on areas because they only produce gas despite the fact that good gas wells equal oil even if in lower quantities.
Also to add provisions that eliminate post production deductions is a must. Texas case law has not benefitted mineral owners. However South and North Dakota have made no legal or statutory rulings. Although not a primary source, we could lobby with a favorable ruling citing those case law and legislative rulings to correct this injustice.
What do you mean by "protect your depths?" Is the depth specified in the lease or am I protected with the 25% royalty and no post production deductions? Thank you for your input. I have a lot to learn.
That bonus and royalty offer you said you recently got from Esquisto sounds pretty good if you can work out the right lease wording. I think some of the advice you’ve gotten is more suited to West Texas, not Washinton Co. From my experience no one is getting 25% royalty there these days.
Esquisto is a subsidiary of Wildhorse Energy who is just completing a horizontal Austin Chalk well on Oevvermann Road just west of Burton, so they are a real operator not a lease flipper and the land company you mention has been acquiring leases for them and their predecessors for several years. No results released on their new well yet but they did a big frac job and rushed to get it tied in to a pipeline.
You need to keep in mind having only 10 acres doesn’t give you a lot of negotiating power, but before accepting an offer from Esquisto/Wildhorse you might check to see if the two other serious operators who are active in your area, Geosouthern and Blackbrush Energy, are interested in your tract.
By protecting depths I meant make sure that if possible you have depth restrictions provisions allowing you to get ach layer of the geological formation of this mineral sandwich.
Dusty is right, I’ve been all geared with West Texas. I do own in Washington. And I believe that it’s near your property. I’ll have to check.
To add to Clint regarding no post production deductions!!! Make sure and others can help but you must include this provision. Sadly the State of Texas has passed laws that allow oil companies to deduct $ from your royalty check because of “post-production” language. Essentially they are justifying that after production then a new “marketable” product has been created, separate from what you leased and was produced. It is wrong. Plain and simple. But case law in Texas and other oil producers also support. However either South Dakota or North Dakota has made no such ruling… such a legal secondary source could be an assett
