My mother owns mineral rights above through inheritance. She was made an offer on the rights so I wanted to assess value to determine if the offer was fair. Can anyone provide guidance on this? Any help is appreciated. Inheritance is from 17 years ago and she just was made aware. Also would like to know if any royalties from previous leases are due. Legal description of land is W/2 SW/4 NE/4 and NE/4 SE/4 NW/4 and NE/4 NW/4 and E/2 NW/4 NW/4 and NW/4 NW/4 NW/4.
Title should read sec25 t6n r6w. Apologies for the typo
http://imaging.occeweb.com/AP/Orders/occ5049146.pdf
http://imaging.occeweb.com/AP/Orders/occ5163737.pdf
Ronnie S, your mother has 2 fairly new wells on section 25-6N-6W. The 1st well was drilled by Marathon and she should be receiving royalty checks by now. If not, she is owed interest after 6 months from the first sales date (possibly 1st production date since sales date is blank) on the completion report. 6% if there were title issues / 12% if not.
The 2nd well was drilled by Continental and she (or you) should start calling them November 1 if you have not received a division order and royalty check.
I did not see any older wells in section 25-6N-6W.
As far as value of the minerals, unless there is a financial need I would not sell. Your mother and her heirs could be sitting on a small gold mine by the time they finish with all of the wells. So far, there have been 2 Woodford formation wells. Continental will be coming back to drill Springer formation wells later on, which could be even better than the Woodford formation wells. Let me look for a spreadsheet and I will put it on here that can be used to estimate the near and long-term value of the wells.
Ronnie S, this is just a rough idea of what the minerals might be worth. You would need to know the allocation percentage for each section to get a better estimate. I have some errands to run, but will try to get that for you later unless someone beats me to it. Thanks to M Barnes for first posting this spreadsheet!
1031-NMACalculationsimplemodifiedfor3bonus.xlsx (20.5 KB)Don, thanks for the information. Not sure I can make heads or tails of the calculations. I appreciate any additional information you can provide.
thanks Ron.
Ronnie, in addition to the excellent information provided by Don Bray I would advise you to do some research into the status of your Mother's ownership. During the leasing, drilling and division order stages of the wells she should have received numerous documents from both Continental and Marathon. If she did not, her deeds may not be properly recorded or they were unable to find her. If you find no clues in her personal records you may have to search the Grady County Clerk's records. If you are unable to do it yourself you may need to hire an Oklahoma oil and gas attorney or a Landman working in the Grady County area. For more help you may want to continue this conversation on the Grady County Group discussion page.
Ronnie Was any of your family listed in the Pooling Order I sent you ?
yes, Ida Mae Dickey is my deceased grandmother.
Everything would have been mailed to Dovie Spence's address. If nobody made an election you would get $1,500 and 3/16th royalty.
thanks Ron. We are contacting Marathon to have the mineral rights transferred according to the inheritance. They have mentioned existing funds are in "suspense". Perhaps I will need to contact Continental as well.
Next on our agenda is to attempt to assess the mineral rights value to determine if my mother should sell.
http://imaging.occeweb.com/imaging/OAP.aspx
I looked up case numbers 201305724 (Marathon's Winter Creek well) and 201406029 (Continental's Farms well). You can review any of the documents using the above link. Final Order 627665 allocated 31.38% of the Winter Creek well's production to section 25. Final Order 643645 allocated 22.16% of the Farms well's production to section 25.
Okay, let's first look at the Winter Creek well. The completion report (Ron McKensie's 3rd link) shows only 40 bopd (barrels oil per day) but the June 2014 production number was more like 314 bopd so I am using that one. 314 bopd times allocation factor of 31.38% equals 98.5 bopd for section 25. 2,276 gas mcf/d times allocation factor of 31.38% equals 714 MCF/d for section 25. Plugging those numbers into the spreadsheet I posted earlier and using 3/16th (i.e., .1875) as the royalty 1 acre of minerals would return about $705 the 1st year, $1,422 after year 4 based on $50 oil and $2.65 gas MCF. 6 similar wells would return about $8,500 over 4 years per 1 net mineral acre.
Now, the Farms well. The completion report (Ron McKesie's last link) shows 665 bopd and 4003 gas mcf/d. This is a newer well so no production numbers yet for the oil. Multiply the 22.16% allocation factor for section 25 and you get 147.4 bopd and 887 MCF/d for section 25. Plugging those numbers into the spreadsheet and the other information remaining the same 1 acre of minerals would return about $1,005 the 1st year and $2,027 after year 4. 6 similar wells would return about $12,161 over 4 years per 1 net mineral acre.
Now... if you look at the exhibit 3 in case number 201406029 you will see the layout of the two wells. Notice that one well comes in from the top (north) and the other from the bottom (south). They pretty much line up with each other. The point I am trying to make is that section 25 pretty much has one horizontal well when you look at the length of each. So for evaluation I would add the numbers of the Farms and Winter Creek wells together to get a more realistic view of what one well might produce as far as royalties go. That would make the return on 1 net mineral acre more like $1,710 for year 1 and $3,449 at the end of year 4. 6 similar wells would return $20,694 over a 4 year period.
Of course all of these numbers are just estimates based on several things that will change. Like production and price. Both are always changing. It is estimated that Woodford formation wells will last 15, 20, 30, 40 or more years with a 5% yearly decline rate after year 4.
Better end for now. Good luck with your decision.
Thanks for the detailed response Don. Your help is appreciated.