Oil payments

North Dakota Mineral Rights Williams County, ND
1

My sister (lucky gal!!) has just found out there is to be a well spudded soon on her minerals.

She was wounding how the payment process goes.

Is there an initial larger payment for the IP or does it all get leveraged out with a regular monthly payment?

Thanks-Bill

2

Bill,

The following must happen before your sister can expect a check.

  1. A pad must be built and a drill moved in that can handle the entire permitted depth and horizontal distance if it is a horizontal well
  2. Surface casing must be set and cemented to protect ground water
  3. Drilling and logging of the wellbore
  4. A decision to treat the well to enhance permeability (the largest cost of a horizontal well)
  5. Setting and cementing mies of steel well casing.
  6. Getting a fracking unit and fracking. (They are booked up months in advance)
  7. Testing the well (IP test)
  8. Putting infrastructure in place to produce the well
  9. During initial production, an attorney will check your sister's mineral ownership in the unit and issue a Diviision Order Title opinion to the operator
  10. The Operators staff will send out a Division Order for approval or title curative requirements
  11. When that is complete and returned, the operator will issue a check in accordance with the terms of the lease she signed. It will reflect the amount her share of product built up since sales of product took place.
  12. There after the terms of the lease and division order will dictate payments. There is no such thing as a regular monthly payment. Refer to the terms of the lease and division order.

A good well in the Bakken or Three Forks formations in Williams should produce income for a long, long time. Payments will be inconsistent so plan on that. Delays and production variances are the norm and uncertainties many.

3

Thanks much Gary for your time and helpful info-

Gary L. Hutchinson said:

Bill,

The following must happen before your sister can expect a check.

  1. A pad must be built and a drill moved in that can handle the entire permitted depth and horizontal distance if it is a horizontal well
  2. Surface casing must be set and cemented to protect ground water
  3. Drilling and logging of the wellbore
  4. A decision to treat the well to enhance permeability (the largest cost of a horizontal well)
  5. Setting and cementing mies of steel well casing.
  6. Getting a fracking unit and fracking. (They are booked up months in advance)
  7. Testing the well (IP test)
  8. Putting infrastructure in place to produce the well
  9. During initial production, an attorney will check your sister's mineral ownership in the unit and issue a Diviision Order Title opinion to the operator
  10. The Operators staff will send out a Division Order for approval or title curative requirements
  11. When that is complete and returned, the operator will issue a check in accordance with the terms of the lease she signed. It will reflect the amount her share of product built up since sales of product took place.
  12. There after the terms of the lease and division order will dictate payments. There is no such thing as a regular monthly payment. Refer to the terms of the lease and division order.

A good well in the Bakken or Three Forks formations in Williams should produce income for a long, long time. Payments will be inconsistent so plan on that. Delays and production variances are the norm and uncertainties many.

Gary L Hutchinson

Minerals Management

4

A layman's answer.....one year after spudding of the well is not uncommon, at least in my experience.