Hey all!! We have mineral rights in the above-mentioned area, and have leased them to Marathon. I called their agent today just to check things out and he said that because of "bad geology" Marathon is getting out of the area and we can probably only expect a bonus of $50 an acre when our leases are up in July. I have no idea whether to believe this or not. Does anyone have any info on hat is going on here. I'm thanking you in advance.
Looking at the wells drilled by Newfield in/from section 159-102-17, 55k and 58k barrels in 18 to 20 months or so aren't fantastic but Baytex and Continental have been drilling wells and seem to be continuing to drill wells that even produce less than those wells. Possibly the landman is telling you it's not worth Marathons time. I would not accept $50 per acre, certainly not without shopping it around to other potential lessees.
Leases are negotiable, if that was $50 for 3 years, you might get a considerably better offer from a speculator if you were willing to sign a 3+2 option or an outright 5 year lease so they would be more comfortable that someone might want to drill your acres during the lease.
I would certainly call Newfield.
I have no Idea how many acres you have, or if $50 an acre would be a significant amount of money to you, An example might be if you had 20 net acre and leased for $50 per acre you would receive $1,000, which I am sure would be welcome but might keep you from leasing for $800 an acre. Is the $1,000 going to make a big enough difference in your life to give up the chance that you could make $16,000?
I am not privvy to Marathons geoligist's reports but oil companies look at time to recoup their investment when they decide whether to drill or not. Marathon may not want to drill a relatively cheap well and wait 7 years to recoup their costs, while another company might.
There are other points to consider. Many companies are now more concerned in the mineral retention business, if they can drill a 6 million dollar well that will do little more than pay for itself and the spacing in 7-10 years, they can hold all the minerals for as long as the well produces, possibly 30 years or more, in which time the price of oil could double and/or the production techniques could improve to the point that holding the rights to your minerals could be far more valuable than the cost of the original well.
Another point is why Marathon would lease you for $50 an acre if they have lost interest in the area. Likely it's so they could flip your lease to a future operator, or possibly participate in a well drilled by someone else. Marathon may not want to drill a well, but that does not mean they have given up all thought of making money off your mineral rights.
Elizabeth, you are near production that I think could show a decent profit, better than some wells that I have seen drilled in the recent past in areas where drilling is continuing. In your place I would not lease my minerals for $50 an acre, unless they were offering an outstanding royalty. Sometimes the bird in the hand is just a sparrow and you don't lose much by letting it fly away. List your minerals here, under listings, there may be alot of people who would like to speculate on your acres for more than $50 per acre. Make some calls, Newfield, Continental, Baytex, Empire oil. A little time spent can give large returns. I hope this helps.
Thank you so much for your thoughtful reply. I'm new to this, and have not much info on how it all works. We leased to Marathon three years ago for $650 an acre - I would hate to think the value had declined that much. It's hard to know who to trust when you're so far away. But I'm pretty sure I'm not going to believe what the guy from Marathon (Pacer Energy) says from now on.
r w kennedy said:
Looking at the wells drilled by Newfield in/from section 159-102-17, 55k and 58k barrels in 18 to 20 months or so aren't fantastic but Baytex and Continental have been drilling wells and seem to be continuing to drill wells that even produce less than those wells. Possibly the landman is telling you it's not worth Marathons time. I would not accept $50 per acre, certainly not without shopping it around to other potential lessees.
Leases are negotiable, if that was $50 for 3 years, you might get a considerably better offer from a speculator if you were willing to sign a 3+2 option or an outright 5 year lease so they would be more comfortable that someone might want to drill your acres during the lease.
I would certainly call Newfield.
I have no Idea how many acres you have, or if $50 an acre would be a significant amount of money to you, An example might be if you had 20 net acre and leased for $50 per acre you would receive $1,000, which I am sure would be welcome but might keep you from leasing for $800 an acre. Is the $1,000 going to make a big enough difference in your life to give up the chance that you could make $16,000?
I am not privvy to Marathons geoligist's reports but oil companies look at time to recoup their investment when they decide whether to drill or not. Marathon may not want to drill a relatively cheap well and wait 7 years to recoup their costs, while another company might.
There are other points to consider. Many companies are now more concerned in the mineral retention business, if they can drill a 6 million dollar well that will do little more than pay for itself and the spacing in 7-10 years, they can hold all the minerals for as long as the well produces, possibly 30 years or more, in which time the price of oil could double and/or the production techniques could improve to the point that holding the rights to your minerals could be far more valuable than the cost of the original well.
Another point is why Marathon would lease you for $50 an acre if they have lost interest in the area. Likely it's so they could flip your lease to a future operator, or possibly participate in a well drilled by someone else. Marathon may not want to drill a well, but that does not mean they have given up all thought of making money off your mineral rights.
Elizabeth, you are near production that I think could show a decent profit, better than some wells that I have seen drilled in the recent past in areas where drilling is continuing. In your place I would not lease my minerals for $50 an acre, unless they were offering an outstanding royalty. Sometimes the bird in the hand is just a sparrow and you don't lose much by letting it fly away. List your minerals here, under listings, there may be alot of people who would like to speculate on your acres for more than $50 per acre. Make some calls, Newfield, Continental, Baytex, Empire oil. A little time spent can give large returns. I hope this helps.
We too have leases in this area that are expiring later in 2013. Who at Marathon (Pacer Energy) told you that $50 per acre is what we should be expecting?
Thanks!
Elizabeth Sullivan Hogg said:
Thank you so much for your thoughtful reply. I'm new to this, and have not much info on how it all works. We leased to Marathon three years ago for $650 an acre - I would hate to think the value had declined that much. It's hard to know who to trust when you're so far away. But I'm pretty sure I'm not going to believe what the guy from Marathon (Pacer Energy) says from now on.
r w kennedy said:Looking at the wells drilled by Newfield in/from section 159-102-17, 55k and 58k barrels in 18 to 20 months or so aren't fantastic but Baytex and Continental have been drilling wells and seem to be continuing to drill wells that even produce less than those wells. Possibly the landman is telling you it's not worth Marathons time. I would not accept $50 per acre, certainly not without shopping it around to other potential lessees.
Leases are negotiable, if that was $50 for 3 years, you might get a considerably better offer from a speculator if you were willing to sign a 3+2 option or an outright 5 year lease so they would be more comfortable that someone might want to drill your acres during the lease.
I would certainly call Newfield.
I have no Idea how many acres you have, or if $50 an acre would be a significant amount of money to you, An example might be if you had 20 net acre and leased for $50 per acre you would receive $1,000, which I am sure would be welcome but might keep you from leasing for $800 an acre. Is the $1,000 going to make a big enough difference in your life to give up the chance that you could make $16,000?
I am not privvy to Marathons geoligist's reports but oil companies look at time to recoup their investment when they decide whether to drill or not. Marathon may not want to drill a relatively cheap well and wait 7 years to recoup their costs, while another company might.
There are other points to consider. Many companies are now more concerned in the mineral retention business, if they can drill a 6 million dollar well that will do little more than pay for itself and the spacing in 7-10 years, they can hold all the minerals for as long as the well produces, possibly 30 years or more, in which time the price of oil could double and/or the production techniques could improve to the point that holding the rights to your minerals could be far more valuable than the cost of the original well.
Another point is why Marathon would lease you for $50 an acre if they have lost interest in the area. Likely it's so they could flip your lease to a future operator, or possibly participate in a well drilled by someone else. Marathon may not want to drill a well, but that does not mean they have given up all thought of making money off your mineral rights.
Elizabeth, you are near production that I think could show a decent profit, better than some wells that I have seen drilled in the recent past in areas where drilling is continuing. In your place I would not lease my minerals for $50 an acre, unless they were offering an outstanding royalty. Sometimes the bird in the hand is just a sparrow and you don't lose much by letting it fly away. List your minerals here, under listings, there may be alot of people who would like to speculate on your acres for more than $50 per acre. Make some calls, Newfield, Continental, Baytex, Empire oil. A little time spent can give large returns. I hope this helps.
Bertha - His name is Dan Clancy and he works for Pacer Energy. We negotiated our leases with Marathon through him.
Elizabeth Sullivan Hogg said:
Thank you so much for your thoughtful reply. I'm new to this, and have not much info on how it all works. We leased to Marathon three years ago for $650 an acre - I would hate to think the value had declined that much. It's hard to know who to trust when you're so far away. But I'm pretty sure I'm not going to believe what the guy from Marathon (Pacer Energy) says from now on.
r w kennedy said:Looking at the wells drilled by Newfield in/from section 159-102-17, 55k and 58k barrels in 18 to 20 months or so aren't fantastic but Baytex and Continental have been drilling wells and seem to be continuing to drill wells that even produce less than those wells. Possibly the landman is telling you it's not worth Marathons time. I would not accept $50 per acre, certainly not without shopping it around to other potential lessees.
Leases are negotiable, if that was $50 for 3 years, you might get a considerably better offer from a speculator if you were willing to sign a 3+2 option or an outright 5 year lease so they would be more comfortable that someone might want to drill your acres during the lease.
I would certainly call Newfield.
I have no Idea how many acres you have, or if $50 an acre would be a significant amount of money to you, An example might be if you had 20 net acre and leased for $50 per acre you would receive $1,000, which I am sure would be welcome but might keep you from leasing for $800 an acre. Is the $1,000 going to make a big enough difference in your life to give up the chance that you could make $16,000?
I am not privvy to Marathons geoligist's reports but oil companies look at time to recoup their investment when they decide whether to drill or not. Marathon may not want to drill a relatively cheap well and wait 7 years to recoup their costs, while another company might.
There are other points to consider. Many companies are now more concerned in the mineral retention business, if they can drill a 6 million dollar well that will do little more than pay for itself and the spacing in 7-10 years, they can hold all the minerals for as long as the well produces, possibly 30 years or more, in which time the price of oil could double and/or the production techniques could improve to the point that holding the rights to your minerals could be far more valuable than the cost of the original well.
Another point is why Marathon would lease you for $50 an acre if they have lost interest in the area. Likely it's so they could flip your lease to a future operator, or possibly participate in a well drilled by someone else. Marathon may not want to drill a well, but that does not mean they have given up all thought of making money off your mineral rights.
Elizabeth, you are near production that I think could show a decent profit, better than some wells that I have seen drilled in the recent past in areas where drilling is continuing. In your place I would not lease my minerals for $50 an acre, unless they were offering an outstanding royalty. Sometimes the bird in the hand is just a sparrow and you don't lose much by letting it fly away. List your minerals here, under listings, there may be alot of people who would like to speculate on your acres for more than $50 per acre. Make some calls, Newfield, Continental, Baytex, Empire oil. A little time spent can give large returns. I hope this helps.
The fact is that there is a 99% success rate in the Bakken formation, no dry holes, so be careful about what you choose to believe.
Larry, if you define success as finding some oil I would agree with you. I would say that not all Bakken wells are profitable. It's not just a matter of having found some oil, it has to get out of the ground and to market. If you look in the wellfiles you will see that core bakken areas have pressures in the low thousands and they flow a great deal of oil quickly and cheaply, in fringe areas the flowing pressure is in the low hundreds and quickly diminishes from there. If the operator puts in a cheap 6 million dollar well, gets an IP of 150 bbl oil and just for the sake of arguement that water produced is negligible. So 150 bbl a day falling 30% a month along with the natural pressure. In 6 months you install a pump and you get a pretty steady 50 bbl a day. After taxes, owner royalty, operating expenses including lifting costs, the operator will probably have to get 175k bbls of oil at $90 bbl to break even. AT AVERAGE 50 BBL PER DAY, HOW LONG WILL THIS TAKE? 9.7 years. That's if the well is still doing 50 bbl a day at that time, if it IP'd at 150 I doubt it will be doing 50 bbl after 9 and a half years. The well described would have successfully found oil in commercial quantity which just means worth selling. I don't think you can call it profitable. If you don't like my numbers, use your own, but if they are anywhere near realistic it isn't going to change much.
The well I described is the one I see most of in the outlying areas, 8 to 18 frack stages, sand frack. Occasionally I see one that was 20 or more frack stages but even then they don't waste ceramic propant on those wells. They are cheap, they are fast, they hold acreage. Except for the value of the acreage they hold and proving the oil is there, I would not call them profitable. The next wells after they figure out how to up the eventual return are going to be profitable. These wells are just placeholders until technology advances or the price of oil rises.
Larry Wagenman said:
The fact is that there is a 99% success rate in the Bakken formation, no dry holes, so be careful about what you choose to believe.
Well, future generations may be the ones who make money,
if spending millions per well just to hold the lease is the current name of the game.