hello everyone,
I have I question about Participating. I have the minerals under my house which is only .32 acres, it is in Williston T 154N R101W. sec 14. I have been offered a lease for 20% royalties. I am young and don't exactly need the money from the lease so would it be worth It to participate or are the a lot of fees that would cut into my profits on such a small tract? any info would be helpful thanks in advance.
There should be no fees for leasing. This is "taxable" income but your payment will probably be around $1000 for the lease, which I believe is a 3 year lease if you are getting what the rest of the residents on the east side got. They HAVE to pay your share of production whether you participate or not, but keep in mind, you own a tiny bit of the town. If you don't participate (Lease) and they do drill, you will become responsible for more costs, such as the costs to drill the well and operate the well and all of the costs related to that well, (proportionate to the acreage you own). What little tiny bit you are going to get if there is production, probably won't increase your taxes that much and you would probably find you had less of a headache by leasing than not. This is just my opinion. Others may have different ideas.
To start with, you are in a very good area. Statoil has been massively successful right next door in section 15 with each of 4 wells. I have seen as many as 14 wells drilled on only 1/2 of a spacing as good as yours so you might possibly have 28 wells in your presumably 1280 (because the GIS map will not behave for me this morning).
If you participated, you would be keeping your options open. You could probably sign on to the Joint Operating Agreement, and probably the operator could net you out, that is pay you out of whatever is left out of proceeds after expenses were paid which would take a lot of the headache out of it. Of course the operator would be nickeling and diming you with small miscalculations but they couldn't get it all back that way so you should handily beat what you would have received in royalty, if they take too much it will be noticeable. Since you don't have to pay anyone a royalty, if you aren't making at least $70 per barrel in revenue at todays prices, start looking where the money is going. You should probably engage an accountant to do your taxes and make sure you take full advantages of all the tax breaks which are substantial. My CPA makes me money, he is underpaid.
One other thing, participation is NOT a suicide pact. An interest such as yours in a really good area such as yours, you should have no trouble selling your interest at any time you feel like. I think the most money for the least amount of headache would be to participate, let them drill and complete wells fro about the next ten years and if it looks prudent, sell your interest. I would be greatly surprised if you have not received several buy offers already from people offering as much as $4k, possibly even more for your approximately 1/3 acre. If you get a few wells like next door I think you will be able to cash out anytime you feel like for a tidy sum. It will never make you rich though.
Young, don't need the money, small amount of minerals....sounds like perfect low risk situation for participating.
and I agree 110% with everything Mr. Kennedy said above.
thanks for the input guys all of the above is very helpful and appreciated!!
Always grateful to read/see items put forth in this forum, I have a question I'm hoping to get feedback on. Not replying often but aware of this spot for the past 3 years, I expressed interest when 2 siblings and myself inherited mineral rights. Continental is from where royalty is being paid thru. I did probate for my mother that finalized in 2012. Royalty checks delivered were based on the percentage split via probate. Recently I became aware that someone within Continental decided to modify the percentage split without making myself or 2 siblings aware of this that has since put a hold on what is being issued. I am questioning How? WhY, How someone can do this without consulting the family members. I realize the answer is to contact an attorney but we all know where that goes. Tedious effort to revisit probate to begin with when concluded 1.5 years ago, this has now tied up money/funds. Infuriating as it is to find this out only by my inquiring when the Royalty was not direct deposited, I wonder who else has experienced this and is this common? That the oil company can revise results of a probate decision without bringing affected parties in to the affair being done? Seems pretty shady to me!
not enough pertinent info provided.....probate is over after deeds of distribution were filed (for all practical purposes)....any real property should get recorded in the county where it is located....you inform Continental....they issue new division orders based on deed of distribution....if for some crazy reason it was not made clear that the 3 heirs received equal shares, then I can see a possible problem occurring...
Continental could care less whether you or one of your siblings received a bigger piece of the pie, so I feel I am missing some information......any chance that in the course of the probate, or while creating the new division orders, they did a title search and found more or less acreage, or the spacing needed correcting by a blade of grass or two.
Contact the royalty department....find out what they say, share, and you might get more helpful feedback....
thx for your reply...as I did not know who might respond I wasn't trying to be vague. A division order was done 1.5 yrs ago and supposedly filed after acceptance. No blade of grass was in the way. What was done was placed on file and accepted by Continental and I agree that they may not care who gets what share of the pie. However after a division order is accepted, if someone within a department doesn't turn over a page and takes it upon themselves while not researching the entire documents to see what was recorded and chooses to reverse a decision that had been accepted and does not inform the parties affected it seems out of place to me.
I had contacted the royalty department as soon as I discovered that the error had been done and informed that they would check in to it...when it was their mistake/blatant error/decision to begin with. It affects distribution and subtracting from 2 to give to a 3rd and asking for reimbursement to "recorrect" their mistake. It delays the next royalty provided and with this error how can trust be assured in the future?
I might still not get it......3 heirs, 1 made a deal with the other two?, someone screwed up at continental and went ahead and divided it 3 ways instead of two....if this is the case....the heir that made the deal has been unjustly enriched and it is that person that owes you....it isn't Continentals responsibility to clean up the mess even though their mistake...unless of course you could prove it was intentional....then you have a tort claim....I get the impression that you believe this was done on purpose...ie "someone within Continental decided to modify the percentage split".........have they checked into it?........also........I hope you aren't relying on your oil royalty's to meet your household budget....I could be mistaken again, but I am getting the impression that this is much more urgent than it should be a) the royalty department hasn't gotten back to yet and b) any delay in a royalty payment is a big deal.........My feedback remains the same.....follow up with the royalty department, check with them once a week if you can't sit still.