I recently received a letter offering ($650 and 1/8 or $750 and 3/16). I was considering participating for $7500. I only own 1/2 acee.
I was wondering if anyone knew more about this situation? how much Can I expect per month in payments? How long does it take to start getting paid?
I would caution you to get very informed before you enter into a Working Interest. Do you have an attorney, accountant, deeper pockets than $7500 as there may be more wells in the future? Do you know the play, do you know the operator and how easy they are to work with? Do you know the likelihood of success? Can you afford the insurance? Have you considered putting that acreage into an LLC to protect you from any liability claims to your personal wealth? It takes about a year to get paid. Your payments will be determined by the equation: net acres/gross acres x royalty x % perforations % in your section. (In this case, since you only have .5 acre/640 and approximately 50% of the perforations, that will not be a large decimal. This well(s) could last for decades and they will keep asking you for your share of the operating costs. Can you afford them? Can your descendants afford them? Have you ever read a Joint Operating Agreement before? Do you understand it? Be very informed before you decide to sign a contract that can hold you and your heirs for decades. This is not a slam dunk great deal every time. You can lose every penny. Giving the caution notes here.
Some folks like Working interests. Maybe they can chime in on the good points.
Larger payoff but larger risks also. This is not a place for anybody not experienced in this business. $7500 is just to get in. It is not unusual for additional expenses, losses etc to result down the line for which you will need to input additional monies. It is not a risk that I would take. I prefer a royalty interest and a good night’s sleep.
I’d echo the caution of M_Barnes & Richard_Winblad here. JOA’s are some of the most complicated contracts in our industry and often only favor the Operator. After all its called a WORKING interest - gotta work for it…
One upside (as it relates to cost) is a blend of leasing and participation. E.g. leasing the required amount to offset the cost of participation. While this mitigates cost basis, it usually requires a LARGE mineral interest AND your still on the hook for your part of the JIB’s
does anyone have an offer to buy minerals in these sections?
Yes there has been a pick up in activity