Working on assumption that MRO kinda knows that they have forced pooling hammer and are dealing with private individual who understandably isn’t going to have a ton of contacts with other potential folks to offer on a lease. Thus lowball relative to what this acreage would trade for if it were a deal between companies, etc.
A bit of guessing, but I would think somebody (heck, including MRO) would pay more than $10k/NMA here in bonus, some of that is extrapolating from Fed lease sales (not remotely apples to apples, but at least an open bidding process), things I hear from people on the non-op side just in NM in general, and some experience doing this prior to 2018 a bit east of you.
The only thing that might be working against you is whatever odds that these folks can’t get operatorship settled here in time to drill within a 3 year term. So maybe you’d have to agree to 2 year extension.
In simplest terms, I am no expert here, this isn’t what I do, and despite all that…I would give you more than $5.5k/NMA in bonus here even though it would come out of my kids 529plan and risk my wife killing me. So surely somebody who actually knows what they are doing and is in the business would do the same.
You would lease it to Alpha. Alpha would have the option to participate in the Marathon wells. If they did, then once the wells are producing you would get paid your royalty in the lease, in most cases directly from Marathon. IF they didn’t participate, which wouldn’t make much sense but I have zero idea what Alpha Energy is up to, then you would be force pooled and that would be stinky for you.
So, for me, I would lease it to somebody big enough that they aren’t going to freak out when they get 6 AFEs and are asked to cough up $60m times 22/1280 = $1m to participate in those wells. Matador, Oxy, etc?
fwiw as far as I can tell Alpha Energy partners operates one old vertical well in the Basin, so I’m not sure that would be my first shout.
Alpha Energy Partners participate as well as others.
You lease to them at a 25% royalty and they pay you a bonus and hold the lease no matter who the operator is.
You and Alpha or another that participates would get royalties from the operator. (Marathon)
It’s best to lease to someone that is going to participate. Pay their share of drilling, Otherwise another company may try and flip the lease to an operator that participates. I just went through this. I spent many hours making calls over the last six months. Also if you have pooling orders it should tell you who is participating paying there share.
In 2018 we negotiated a lease in Section 34 T21S, R33E Eddy County, NM.
Marathon and another company both submitted bids for the section. We leased to the other company for 10K pnma, 3 year lease, no extension on a mutually agreeable lease. The better bargain between the two entities. Marathon ended up drilling the section, and we receive royalties from Marathon so the other company was apparently a flipper. Thought I’d add my 2 cents worth. Marathon to the best of my recollection would not go over 5K pnma. So, the other companies offer was the more attractive offer at the time.
Hey Rick, thanks for telling me about your experience with Marathon. It is interesting that they seem to be the low bidder on bonus money compared to the others making offers.
But I guess they didn’t get to be a bid dog giving away cash as the high bidder.
