I'm considering taking some chips off the table given my age and wonder what neighbors are seeing for offers to purchase in this immediate area. I've been offered $5250 per NMA for 17+ NMA but have heard that some offers have exceed $7,500 per. Thanks for sharing any information which might be helpful.
Considering that they are force pooling and leasing at $4000/ac, that $5250 sounds a bit low. First offers usually are.
I would tend to agree with Mrs Barnes - I will run some numbers and circle back later this weekend.
Thank you. I appreciate your continued input.
Thanks.
Gerald
Based on land records it looks like your trust has a 3/16 royalty. Terms in your lease will drive variances in offers as obviously a lease that has a 1/4 gross lease (no post production costs) is worth much more than 1/8 royalty that is a 'net lease' - includes post production costs. You have a decent royalty rate (as compared to a 1/8).
I noticed that order 656593 related to Newfield pooling cause # 201603824-T were (1) $1700 and 1/8RI, (2) $1600 and 3/16 RI, (3) $1500 and 1/5 RI or (4) no cash and 1/4 RI. I didn't see the $4000/acre force pulling Mrs Barnes mentioned. The order was issued in September 2016. Newfield is looking to drill an extended lateral, the Roath 1h-33X, which permit was approved in July 2017. The orders were extended in July until March 2018, so there has been some delay in Newfield's progress.
The nearest offsetting wells are the (1) CAROLE 1H-21X is an extended reach Woodford in 7N-4W S28 (toe is in S21) and the (WATKINS 1H-9X) which transverse S9 and S16 of 6N4W although its surface location is in S4. Additionally, the INCE 1H-22X well transverses S22 and 27. These are decent Woodford wells and based on the filings and other AFE's I have seen they cost around $10.5 million. With that said, as compared to the Woodford STACK wells, these Woodford wells deliver inferior economics based on reserves for similar costs.
The geology in the area is interesting, as the formations come back east as compared to the area south of you in Garvin where there seems to be some structural features that result in a rapid ‘shallowing’ of the formations. If you review a map, HZ Woodford production is generally along a line NW to SE from central Grady to northern Stephens.
I believe there are two main types of mineral buyers (and of course many variations in these two classes), (1) some that base offers on diligence such as geology, offsetting production, time frame of development, etc as compared to (2) the type that I would characterize as the type that likes "to see if anyone takes this low ball offer".
The first group can be more aggressive when acquiring acreage if they are comfortable with the projected production and accompanying cash flows. The second group try to acquire so cheap that it doesn't matter if their beliefs relating to production and cash flows come true (if they even have a view).
The fact that there is a single well permitted which can be underwritten is a positive, but the real value to a mineral buyer is multi-well development. The operator, Newfield isn't pursuing this area in earnest as compared to the STACK. They may at some point, but currently their main efforts seem to be to the north. This creates a bit of uncertainty when it comes to density/down spacing wells.
Utilizing the cash flow projections from a single well can make it difficult for a mineral buyer to get aggressive on pricing - they need 'line of sight' to down spacing/full development to really drive returns for the risk they are taking on and those wells have to be within their investment time horizon. Unfortunately gaining a line of sight into down spacing is difficult in this area, apparently the development of this specific well was delayed.
After reviewing the production profile/economics, I would think that someone bidding in the $5250/acre range is most likely assuming the completion of at least 1 well in addition to the currently permitted well in the next 2 years.
For what's its worth, that's just my opinion/review. Happy to discuss more if you would like any additional insights.
Thanks for your thorough input! If I have additional questions, how can I best reach you?
Friend me then pm mess I don’t think we are permitted to place phone numbers or emails in chat
Jeff...sent a friend request today. Thanks.
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Mr. Beunier,
In your posting above, you say that Newfield appears to be delaying drilling of the Roath 1h-33X. The original permit expires in January 2018. I don't know where to look for the extension that you mention. But, I'm curious because I thought the Notification of Well Spud (posted on OCC website last month) indicated drilling of the well was actually started. Am I wrong about the meaning of this document? I appreciate any information you can provide to help educate me!
The bad news is that I need to eat some crow (its really tough to do) - Joyce is correct as I should've looked in 7n4w s33 - they did in fact spud a well on July 10th. The good news is they must have got through their forced pooling and you should have a drilled well now.
Thank you Joyce for pointing that out, I was scratching my head for a second and had to go back to the reg order as I read the legal description wrong.
Good Morning Jeffrey. Those of us that try to help others from the good of our heart make a mistake now and then. The taste of 'crow' is not so bad. At least your heart was in the right place. Keep on trying to help others. We do appreciate your efforts.
Clint Liles
appreciate that Clint...
Jeffrey - thanks for the confirmation. I'm happy to finally be able to add some value to this forum that's helped me so much! I hope to see a completion report or production soon on this well! Fingers crossed for a good one!
Thank you for pointing that out - made me go back and look at it again.
I will be keeping track of this one a bit closer now - will let you know when I see the completion report if you haven't already posted about it.