First of all my apologies in advance for bringing the level of discussion down.
I inherited 5 acres of mineral rights in Howard County. I have the particulars and have located it on the Texas RRC's map. The operator is about to or has started drilling. My sisters have like pieces of land - they are about to sell their rights.
I am at a loss as to whether to sell or take the royalties.
Both the operator and the potential purchaser told me I'll see around $1000 a year royalty payments once the well settles down. Potential buyer told me today he thinks it will be a 10-15 barrel a day well.
Does any of this sound remotely right? The royalty calculators I've seen give higher numbers than the 1000/year, but I could be entering data wrong.
Thanks for any insight.
Hi Rudd at the risk of sounding like a broken record to those who have heard me answer this question many time I say never sell. The price they are offering you is based on what they expect the well that is about to drill will bring. You have to remember that when you sell you sell all rights forever and you never know what the future will bring. They might be offering you a fair price for what is happening now but don't forget the what if factor.
Rudd,
After checking numerous completion reports for Howard County on wells that have been completed since Jan 1, 2014 the least production on a well was 50 barrels per day. I wouldn't believe the 10-15 barrel per day gibberish. After the decline on the 50 barrel per day well it will still possibly produce 25 barrels per day. I agree with Craig, don't sell your minerals. Monthly royalty checks are nice. And you've still got the minerals and at a later time you could still sell them/or sell a small percentage of them.
http://webapps.rrc.state.tx.us/CMPL/viewPdfReportFormAction.do?method=cmplW2FormPdf&packetSummaryId=106863
Clint Liles
Thank you both for confirming what I felt in my gut. The piece is in Section 6, Block 34, Township 1 South,Howard County, TX, T&P Ry. Co. Survey. Not much happening out that way yet according to the RR commission GIS system.
Can anyone give me an idea of what likely royalties might be - or how to calculate them? I read that the minimum by law now is 12.5%, but this lease goes back to the 1880's. I ran the numbers based on the 12BPD/12.5% and came out with much larger numbers than the $1000 per year.
Is it bad form to call the operator up and ask for a copy of the lease, or should I go to the courthouse - in Big Spring I assume? Is the operator required to notify me of a completion/dry hole etc?
I apologize if I am being a pest, I just have very little knowledge and don't want to get eaten by the sharks.
As a bit of a funny, after I posted the first message today, the potential buyer copied the three of us with his offer. In the area to stipulate the sum, he had one number in numerals, and the written number was about 30% less. Either careless or trying to pull something. Either way, no dealing with him!
Rudd I advise you to dig as much as you can. I found minerals that I did not know that I owned and nobody was going out of their way to tell me about them. You never know what you might find unfortunately the bunch down at the Howard County courthouse are not very novice friendly. You should ask the operator for a copy of the lease and a print out of all production from the well in my case they were holding money and had the mineral rights listed as heir unknown.
Rudd I looked at your location it is good you have good things yet to come. There have been some completions close to you recently but they may not have shown up on the RRC site yet. Have you read the completion reports that That Clint has posted recently? It would be a good place to start.
PS I am in the same block as you.
Is your operator Crownquest or Pioneer? It looks like both have wells permitted in section 6 of block 34 T1S. Pioneer has some older vertical wells from 2011 in that section too. I think the Crownquest well will be producing very soon.
It's Crownquest.
Again, I thank each of you for your comments.
I went through a few of Clint's posts, but ran out of time.
Craig, they (Crownquest) knows who I am, I called and they were able to look the land up from my my name. About a month and a half ago, they told me they were starting one well in a few days, and another a week or two after that. The lease runs out the end of August, they are trying to beat that deadline.
Marcus T said:
Is your operator Crownquest or Pioneer? It looks like both have wells permitted in section 6 of block 34 T1S. Pioneer has some older vertical wells from 2011 in that section too. I think the Crownquest well will be producing very soon.
Crownquest is a good company their information helped me find the other operator.