My wife and I have just been sent a lease for 160 acres my wife's family owns in Sheridan County Township 31 North, Range 57 East, MPM Section 34:NE 1/4. The Cover letter has Bakken Oil but the lease is with a seperate LLC.
This is completely new to us and don't know what is fair or standard. They have offered $350/acre for a 3 year lease and 3/16 royalty for oil and Gas and references a 13.33 net mineral interest.
Can anyone tell me where to begin and if what is being offered is fair? We live in California and this is completely new to us. We hear great stories about people getting money for oil on their land and hope we have oil but don't want to be fleeced.
I am somewhat familiar with the area you described as I have minerals in Township 31N;R59E;Seciton 31. I leased these minerals back in 2009 when bonuses were only $100/acre and I have not kept up with the current bonus amounts. Your bonus amounts are somewhat reflective of the nearest producing wells to your minerals and the amount of production from these wells. If you will google "Eser.com", put in your township/range/section, a map will appear showing your area and then you can move the mouse around other areas near yours to see what wells exist in these areas. If it were me, I would not accept any first offer as Bakken Oil (which is probably a lease broker buying leases for an operator) has a ceiling amount which is higher than the terms you were given. I was contacted via Federal Express back in October 2010 by Marathon Oil Co. who owns our mineral lease. They stated that our area had been temp. spaced and they plan on developing this area later in 2011 or 2012. I say this to let you know that Sheridan County will eventually see increased drilling acitivity as it lies within the Bakken Formation. All said, do your homework and find out the current bonus rate for this area as $350/acre does sound low. Also, 20% royalty has become the norm in some areas, especially ND. The 3 year lease sounds good but I would have a 2 year extension clause in your lease. Finally, I can't emphasize enough, the part of doing your homework and know what the current rates are in your area.
Just a quick guess, I believe your net mineral interest is a function of the percentage of ownership interest you have in the total 160 acres. (ie. other people also own percentage interests as well) If I did the math correctly you have a 8.33% interest of the whole and others have 91.67%
This means if the lease is $350/acre you get $29.16*350 or alternatively 350 for 13.33 acres, both of which are $4,665.50. as your share of the bonus.
Also, mine was much further west and north (SW of Plentywood) and we were only offered $300 about 6 months ago for a 5 year lease, also with an "new" unknown LLC. When I asked it to be limited to a 3 year and release lease only upon receipt of cash, they declined to modify. I am waiting for someone else to come along at the moment, so you do risk loosing a deal sometimes, but then you don't know what might have happened had you accepted.
I've heard 3/16th is good royalty percentage, (but as the previous poster reported some are getting 20%) (3/16th is 18.75%) but you need to review the whole lease for other terms like how much for shut in wells and the like. If you don't understand these things you should have it reviewed by an attorney. Also, be careful with getting payment in escrow and not just a promise to pay later. If you give them a signed lease and then this LLC doesn't pay, they may have already signed over your lease to someone else and then you are left trying to sue to get your money from a bankrupt LLC speculator and trying void your lease as against a party claiming to be a good faith buyer innocent of the fraud by the other party LLC.
Your location is I believe in the heart of new active development closer to the ND border, go here to find what's happening around you:
Thank you for your insight. You are dead on on the amount and the two things I worried about are the shut in well price and the fact they have me tied up on a year to year basis after that for no money.
I have confirmed that the property is located in the heart of the activity and obviously want to participate but don't want to give anything away and also don't want to lose an opportunity.
Cardinal Oil Company is active in your area so you moght want to check with them. Try ESER.com. Enter your description - 34-31N-34E and you will be able to see active and inactive wells in you area of interest.
Be sure to have an attorney review any contract before you agree to anything. My family uses Laura Christoffersen in Culbertson and we are very happy with her work and rates. She is up to date on what is happening through-out the area.
I also used Laura Christoffersen back in 2004 and she did an excellent job. Would she be a good source to contact in regards to what the drilling activity forecast is around the Froid, MT area?
Larry Johnson said:
Cardinal Oil Company is active in your area so you moght want to check with them. Try ESER.com. Enter your description - 34-31N-34E and you will be able to see active and inactive wells in you area of interest.
Be sure to have an attorney review any contract before you agree to anything. My family uses Laura Christoffersen in Culbertson and we are very happy with her work and rates. She is up to date on what is happening through-out the area.
I have an appointment tomorrow with a oil and gas lease executive, if that does not work as expected I will definitely give Laura a call.
Tried the eser. com. Didn't see a spot to put in the township and range.
Also if I were to contact Marathon or Cardinal which department handles oil and gas leases. I have googled Marathon and Cardinal and can't figure out who to call to talk about oil and gas leases.
I've been on the Eser.org website many times before, and in most Township/Range/Sections you could scroll down and see mineral leases and such data, of the mineral owners for that area.
Tonight, I have checked on many T/R/S and haven't found that data when scrolling down.
Is anyone having the same thing happen?
Maybe they are preparing for this site to be a paying website for that information, as the leases/data they'd listed was such data found on the NDRIN that charges a subscription fee.
I am having the same problem with the Eser website. I have no idea what's going on but it could just be a glitch in the site causing this problem. I am not too impressed with the information on the Eser site as it is not updated for several months at a time. If they began charging for this service, these matters must be corrected.
Snues said:
I've been on the Eser.org website many times before, and in most Township/Range/Sections you could scroll down and see mineral leases and such data, of the mineral owners for that area.
Tonight, I have checked on many T/R/S and haven't found that data when scrolling down.
Is anyone having the same thing happen?
Maybe they are preparing for this site to be a paying website for that information, as the leases/data they'd listed was such data found on the NDRIN that charges a subscription fee.
Yes, I noticed they hadn't posted new data for some time. I began to wonder if they were in trouble for posting data that you otherwise pay for, at the NDRIN.
As for seeing the surfaces and well activity, its still a great site, but I will miss if they don't keep posting the other data. If they do charge, they will have to be more timely on posts.
I wasn't sure if it was a glitch in the website, or just my computer telling me I need a new one.
You don't need a new computer as mine is doing the same thing. I agree that this is a great website but if it is not updated, it becomes useless over time. It still provides good info on P&A'd wells and some of the more recent drills. Maybe things will change in the future but don't be suprised if won't cost you as $$$ is the name of the game.
Snues said:
Charles,
Yes, I noticed they hadn't posted new data for some time. I began to wonder if they were in trouble for posting data that you otherwise pay for, at the NDRIN.
As for seeing the surfaces and well activity, its still a great site, but I will miss if they don't keep posting the other data. If they do charge, they will have to be more timely on posts.
I wasn't sure if it was a glitch in the website, or just my computer telling me I need a new one.
It would be my guess, Eser either intends to begin charging, or they've been told to not display the documents they had been showing, unless Eser pays a fee for displaying them.
NDRIN subscription is $25 month, but is kept up to date.
I hope this is just a temporary glitch and Eser is trying to find the key, to updating as the county recorders update.
Thanks for letting me know I wasn't the only one not getting the data anymore.
Maybe Santa Claus will bring you a nice suprise (hint: a new computer or good news on your mineral holdings). If it were me, I would prefer the ladder. As for Eser, I will only monitor this site but if I require specifics, I will contact the NDIC via email or phone. I have found them very helpful in the past. I'm not paying the $25/mo for the NDRIN subscription as I don't think I would benefit from the information. What areas are you're minerals located in? I'm just hoping things will get "booming" in the MT area but it has been very slow thus far. If oil remains around $100/bbl. this area should see alot of acitivty in the next couple of years.
Snues said:
Hi Charles,
aw shucks, I wanted a new puter. lol
It would be my guess, Eser either intends to begin charging, or they've been told to not display the documents they had been showing, unless Eser pays a fee for displaying them.
NDRIN subscription is $25 month, but is kept up to date.
I hope this is just a temporary glitch and Eser is trying to find the key, to updating as the county recorders update.
Thanks for letting me know I wasn't the only one not getting the data anymore.
I'd say time is on your side. You have what they want, (mineral acres to lease) and they will either come back with an increased offer, or another company will. If they truly want it, and don't want another company to get their hands on it; this will increase your negotiation prices for both Bonus and Royalty.
Keep doing your homework and find out anything and everything you can about this company, your mineral acres, and the going rates from nearby sections if you can.
This could turn out to be a good thing as you can take this time to read up and educate yourself on leases and the wording that should be in a good lease. It should not take long before a landman will stumble across your minerals and offer a new lease. Don't forget, things are very slow to get going in Montana as ND has been and still is in the spotlight. As long as oil is hovering at $100/bbl the leasing and drilling will continue.
Jason Greemore said:
because I did not return my lease in a timely matter the offer was withdrawn.
Not sure if that is a good thing or bad thing. It has given me the time to make sure everything is in order with the property.