I am new to this forum and the whole business of mineral rights leasing. As background, I was contacted a couple of days ago about leasing my mineral rights. It appears I have a 1/3 interest in the mineral rights to 120 acres in McClain County. I have tried to do a little research and think I know roughly where the property is (Sec. 28 and 33, Twp. 7N, Range 4W and Sec. 32, Twp. 8N, Range 4W).
I do not have a problem drawing this out but I do not know anything about the shale formation (name) or the lease terminology. I have a tendency to be suspicious of offers like this as it seems to have come from nowhere, however, I do know that with the advent of fracking older oil and gas fields are becoming productive again.
I am basically looking for information about the whole process and trying to educate myself in order to make an informed decision if things progress to that point.
John
John...Which town are you closes to? Would that be Newcastle area or ? I believe you are in the SCOOP and may also be in the STACK play. If so it's fixin to get busy, busy, busy! You need to let some of these guys on the forum help you learn what you have. Tell them what your offers have been and by whom because they can sure help you decide what's good and what's not. I'm just their eyes on the ground down here in western Garvin and NE Stephens (those are also very good forums with lots of good information you might need before making decision). On here their are engineers, attorneys, accountants and all around smart guys in this lease business. They really can help! I'm going to try to post a few things that are in your area. Don't just into the first lease offer because they are usually not the best for you (and are best for the companies who are leasing). Best Wishes!
http://www.newfield.com/assets/pdf/@NFX_3Q13.pdf
http://www.ugcenter.com/Woodford/The-SCOOP-An-Oklahoma-Play_115669
John, welcome to the forum. The best thing to do is read about the last six months on McClain, Stephens, Garvin and Garfield to get up to speed. Most of your questions will be answered. Go online and get the last couple of investor presentations for Newfield and Continental Resources in particular. Your acreage is in the Woodford shale oil zone. Some nice long two section wells are being drilled near you, hence the interest in leasing. Don't let them rush you, get informed and get good lease terms. Spend the weekend getting caught up and then we can answer more specific questions.
Thank you for the information. Of course now I have more questions. What is the SCOOP? What is the STACK?It appears from the section map that this may be near Dibble but I am not real sure about that right now.
I need to contact my cousin who has been point on this.
Thanks again.
John
John...the SCOOP (South Central Oklahoma Oil Province) is the name Continental gave the South Part of the Anadarko South Cana Woodford . I live south of Lindsay and I can tell you it's an oil boom like no other we've seen around here in our lifetime and we've been through two or three big ones. Continental, Newfield, Apache and Marathon seem to be the big players in this boom and they are usually drill horizontal wells to the Woodford Shale (although i've heard of a great well (the Wilkerson) up not to far west of you that was a super well which was drilled to the Springer Sand. These companies had 3 D siesmagraphing done and could see everything that is down there. They've said that it's as deep and wide as the "Grand Canyon". They are setting tanks and pipelines to the wells even before they finish drilling than and I haven't heard of ANY dry holes that was drilled by the Majors since they started this business in the SCOOP. I wouldn't mess with leasing to anyone that is not a major oil company. Several of the companies that lease for the majors are: Jackfork Land LLC for Continental, Energy Lease Acct. for Newfield, Striker for Apache, etc. Some won't tell who they are leasing for and I might shy away from them. Continental has said they knew for a long long time that it was down there but it was just too deep to mess with until oil got close to $100 a barrel. Now it is feasible to go after and they are going for it with a vengence!!! I'll put some more older articles on here that you might enjoy. Up until now McClain hasn't been very hot but believe it's lighting up too! What they seem to have here is more oil and condensate (which sells for the same as oil) and less dry gas like further west.
http://seekingalpha.com/article/754371-newfield-south-cana-wells-sh...
http://info.drillinginfo.com/category/woodford/
http://media.corporate-ir.net/media_files/irol/19/197380/CLR_Sunday...
Well, I have done some reading on the Garvin and Grady County forums and am beginning to get an idea of what is going on. I have confirmed my mineral rights are a 1/3 interest in 15 acres, not the 120 I was told. Drawing squares on paper with all sorts of lines through them can be quite revealing.
I still do not know who is making the offer but it is now up to $800 per acre plus 3/16 or $500 per acre plus 1/5. I understand to $$$ per acre as a one time up front payment. I do not understand the plus 3/16 or plus 1/5 other than it seem to hinge on a well being drilled and the subsequent production.
This forum has been incredibly informative and has given me somewhat of a plan for additional research.
John
I have another question. The offer I have received comes from Paladin Land Group. I do not know who they represent and I have not found anything online. Are they legitimate?
My inclination, if I choose to proceed would be to go with Newfield or Continental Resources.
Comments?
Thank you all for your input.
John
The 3/16 and 1/5 would be your proceeds from the sale of product. 1/5 =20%. So for every barrel of "your" oil they extract and sell for $100, you will get $20. If you elect 3/16 then you get $18.75. I imagine there will be 640 acres in the unit of well they drill (1 section). You have 5 Net Mineral Acres NMA. So if you select 1/5 and they sell 640 barrels, 5 barrels were yours and you get paid $100.
The language in the lease is more important than the company leasing. Unless you have 300-400 NMA, you are not going to influence who the operator is.
Paladin is not listed on leases in the last 5 years in McClain Co, they may be leasing for a Major. I've personally not heard of them.
Todco, Unit, Schonwald, and Continental are the primary Lessees in those townships.
I disagree with Linda on totally discounting the minors players in the leasing world. Very often you can get better terms from a non-major. However, that is only likely to happen when drilling is imminent. Leasing early may result in less bonus. But the bonus paid may be the least important part of the lease. And it may never get drilled, and holding out will leave you with nothing. It is gambling in many ways.
Paladin Land Group is a new LLC formed in Oct 2013.
The only thing I was thinking about with signing a lease with someone that's not a major is that they may drill a vertical well (without 3D Siesmagraphing) and be more likely to get a dry hole. I'm sure Rick knows more about it than me so if I were you I'd take his advice. I don't alway think clearly on these things. Thank goodness some on here help straighten out my mistakes!
Linda, It is hard to say. Either the big companies are interested in drilling a horizontal in the area or they are not. Leasing to a small operator really is not going to change anything for the majority of us. Those with 400-500 acres in a section, yes they can make a difference. There are not as many dry hole anymore. I only show 2 out of 650 in the last 4 months reported as a dry hole. Of course some of them may not be profitable and be plugged shortly.