I own mineral rights in 24-153-98, McKenzie County. I have been informed that Statoil drilled a well some years ago which produced for more than a year, but then was stopped (capped?) because it developed some problems (leaks, not sure what else). The well pad was in section 25, but the well was named Jay 24- (maybe because it extended northerly through sections 24) . Statoil never leased my interest, although it leased the interests of other family members.
Now I have been contacted by a firm about selling (they will not lease outright, they only will buy or buy half and lease half or something like that) my mineral rights to them. I have been told by them that Statoil either has drilled or is drilling another well maybe to replace the first well.
I have read Mr. Kennedy's responses with interest especially about non-consent. I had already leased several years ago my mineral rights under another section entirely (but no wells there yet) before I read about non-consent.
So since I really do not want to sell, what are my options? I do not even see point of leasing since well seems imminent (I would rather that they not drill given low gas prices, but maybe since I read here that costs of wells has gone down, it is profitable to drill and extract even with low gas prices).
Mr.Rosoff, if production has ceased, Statoil had to drill a new well to retain their leases. Spud date was 6-14-2015. The well may not be completed for a year after they reach total depth, which could place first production in the middle of 2016.
Statoil is one of my favorite operators for drilling competence but everyone catches a bad break sometimes.
I presume that Statoil made you a lease offer and possibly sent you an AFE participation proposal. If Statoil has made a lease offer, your chance to lease has most likely expired long since. Someone who told me they wanted to buy half and lease the other half would lead me to believe that they merely wanted to buy half which would happen first and that the lease on the remainder would never happen.
Why would they want to buy half? If you have not yet received an AFE proposal to participate in the new well, the buyer would be entitled to participate in a well where they know oil exists in comercially marketable quantity. That takes alot of the risk out of it.
Prices are low right now but Statoil needed that new well or they would lose the leases they do have and oil prices will not always be low. I think your well will be modestly profitable at todays prices and several more wells will be drilled when prices are much, much better. Maintaining control of those mineral acres is the primary factor to Statoil. Statoil needs to be in control of that spacing when prices improve. They know there is profit there, they just don't know exactly when.
Mr. Kennedy, thanks for responding. Actually, Statoil made me a lease offer last summer (2014) backdated to the November 2011 (as I recall) for 3/16 and something like $550 per acre bonus. I responded requesting to negotiate on some of terms in lease (standard stuff unfavorable to lessor), and never heard back from them. I believe that the person making me an offer now has some kind of partnership with Statoil, but I do not know that for sure; that is what family members are saying or surmising. They contacted me several months ago, but are going back and forth, making offers, withdrawing, then making offers. Statoil has not contacted us with a lease offer this time around, and never to the best of my knowledge sent me an AFE participation proposal (not now nor last summer 2014)
So you say they are maintaining control, but if they never leased my mineral rights, do they have control? Do you mean that by drilling the replacement well (the well has an "R" in its name) they are maintaining control of the mineral rights, because they have leased some but now all of the rights from family members. Personally, I would just as soon that someone known for drilling competence drill the wells.
If I don't lease the mineral rights, then am I automatically non-consent, or would we have to do anything to be non-consent (sign any paper affirming non-consent). (I am assuming that they never responded to my response to the lease offer last summer because the well had stopped producing. If we were non-consent on a non-producing well, then they would owe us nothing, as I understand it.) Thanks for any insight.
Mr. Rosoff, you need do nothing to be non-consent. By drilling the replacement well, Statoil maintains control of the entire two section spacing and some day there will be 10 to 20 wells there. The lease offer from 2014 almost certainly forclosed your opportunity to lease to anyone but Statoil. If Statoil drills a good well, I believe they will make you another lease offer because they are not in the business of recovering drilling costs and a 50% profit, they are in the business of recovering drilling costs and making a 300% profit, or more. They need to lease you to make the kind of money off your acres that they want to make.
Don't ask them to send you an AFE. Read NDCC 38-08-08-3C. They need to make a good faith lease offer which they probably did even though they never replied to your attempt to negotiate but they Must also offer you a chance to participate in the well before Statoil can legally impose a risk penalty. Once you are certain the well has recovered drilling cost, you can challenge any risk penalty. Of course, the first time you do that, Statoil will most likely be on the ball for future wells. Good luck with your new well.