Oil in-ground estimates

[Marine1971]

I have an interest in Martin County. I have been given an offer. How do I know the amount of oil on this property? Sell versus receive a monthly/quarterly payment?

Any help is appreciated.

[NMoilboy]

Hey. Somebody would need to know where specifically your property is located. With that, chances are…if so inclined…somebody on this board could possibly tell you:

1. How much oil per year your existing wells might make
2. How many future wells you might have get drilled there and how much oil each of those might make

Etc.

If you wanted to know the amount of risked recoverable oil on your property. Maybe. Or maybe someone could tell you if your offer was great, poor, medium, etc. But again, way too general.

And yes, your bargain would be to sell for guaranteed X today versus hold out for non-guaranteed multiple of X down the line paid out month-by-month.

[Marine1971]

Martin County Lohan 9

[NMoilboy]

So…in Exxons Rivers 2 unit. Which has one active producer, 7 wells drilled and a rig drilling the 8th well. Not a bad place to be.

Those 2.5 mile long wells will make about 550-600kbo each IMO. There are probably at least 2 more pretty good wells (Wolfcamp D) that could be drilled also in addition to the ones they have worked on so far. Assume that happens down the road.

But lets just say those 9 wells for a total of say 5 million barrels of oil, with half of it produced by end of 2026.

So 2.5 million barrels in an 800 acre unit by EOY 2026 (assuming they come online by end of 2024, early 2025). In this unit there would be 800 x 8 = 6400 nra (net royalty acres). So lets say by the end of 2026 a net royalty acre there would make 390 barrels (2.5mill divided by 6400). At say $75 barrel, thats $29,000 per nra by the end of 2026. With about that same amount again over the next 10+ years from there.

And those numbers are probably a little bit conservative. People making you a fair offer should be offering you mid-$30k’s per nra at least, IMO. Those are some numbers. Take all of this with whatever grain of salt you would normally sprinkle on advice you get from strangers on the internet.