I have a 1/3 interest in an undivided 1/18 interest in nearly all of one quarter of Carter 21-01s-03w I’ve been approached by a landman who works for a subsidiary of Continental, as far as I can tell. How would you make the decision to sell or hold? What would a fair offer per acre be?
Chip
Chip, I don’t usually tell folks what to do with their minerals as it is a personal decision because no one is in your shoes but you. If your minerals are in Section 21-1S-3W, they are a part of the new Bowery well that is a very prolific oil well. It is a monster.
Todd, thank you…I saw the Bowery lease info on the otcportal but wasn’t able to see production numbers. I need to dig through some paperwork tonight.
I see Continental, in May had an intent to drill Bowery No 1-16-21HW in section 9, just a couple sections north of my rights. Interesting.
Chip
Same well. Takes in Section 16 & 21.
Would it be wise to counter their offer with an offer to lease? How can I check to see if there are current leases on the rights? Man, I should probably know this stuff.
Most likely your interest is subject to an old lease or their recent pooling. You can ask them what royalty your interest is subject to as it makes a difference on the value of your minerals.
Production information can be found on the OTC site. It is usually four or so months late. Type in the well name in the LeaseName box. I just did and Bowery is posted as active as of November 2021, so no production showing up yet.
This area is overlain by lots of shallow wells from earlier drilling and now is being drilled by horizontal wells in the deeper zones. The current well is positioned in order to leave room for additional wells in the future.
Continental was leasing in 16 & 21 back in early 2021. They pooled the section in June 2021. Check case 202100228 to see if your name is on the respondents list. https://imaging.occ.ok.gov/imaging/OAP.aspx?casenum=202101903&casetype=CD If you did not respond, then they picked the lowest royalty for you.
When anyone makes an offer to buy, I am pretty sure that they intend to make a profit off that offer and I would rather make the money instead. The first well is finished and is apparently a successful well with room for more wells to be lined up beside it. Only you can decide if their offer works for you. In my experience, first offers are low just to see who will bite.
Martha, my name does show up on that document. Is it wise to ask them to add me to the pool now or has that opportunity come and gone? Is selling my best option to earn some income or do I have other alternative proposals for the Continental landman? Thanks so much!
GOCHIP- If you are not listed as a Curative party or a person associated with an Estate, then your title is probably good to go. If you are minerals are in either section, you are part of the unit (what you called a pool). The well is only 40 days old so division orders and first revenue won’t come out until April or May, 2022. There are parties offering more than continental’s mineral resources company.
Thanks, Todd. Your responses along with Martha’s have been extremely helpful. I’m not sure I should list specifics about my rights or the offer I received but I’m pretty far removed from the inner workings of this process and just want to make sure whatever decision I make validates the actions my great grandfather took so long ago. I wonder what he would do?
It all boils down to this: will the royalties or disbursements paid in Q1-Q2 2022 be greater than the total of the offer to buy the rights today? Is there a way to calculate expected disbursements based on the predicted production level and the percentage of royalties I had been receiving in the past, which were small considering it was a group of old small shallow wells as far as I can see. I have a document which shows me exactly which wells were within the area of my mineral rights.
Thanks again.
If your name was on the pooling respondents list and you did not reply to the pooling within 20 days, they assigned you the lowest royalty and highest bonus amount. Done deal. No negotiation allowed. If you have not received that bonus amount, then you need to contact the operator listed on the pooling order. Actually, you may need to contact both Casillas and Continental to see who is holding your bonus.
Is your name and address properly filed in the counties where you have minerals is the next question. If they cannot find you, they cannot pay you.
The distribution of royalties is based upon an equation. net acres/actual spacing acres x royalty x % of perforations in your section.
An example would be 2.5/640 x .125 x .5=.00024414. So every dollar that is paid out on the well has this decimal minus any taxes and post production charges if they do those. I picked the 1/8th royalty since that is probably the minimum from the order. Your decimal will be calculated from how many net acres you have. The last term assumes a 50/50 split with the two sections. Usually, that is corrected once the survey is run and may not be exactly 50% in each section.
The first check you get will be for about five or six months of production, so the biggest one. Every check after that will be monthly in size. Active date for the Bowery is 11/5/21 so first checks should go out at about May 2022. They have hundreds of mineral owners to check title on.
Another item to consider is that Casillas had already filed for increased density, so that may entail another well. Notice in the picture below that the first well is hugging the easement along the west side of the section. There is room for several more wells to line up like cigars before they run into the spacing of the other well in 16. Also note that they have a 1040 ac unit. I did not go back to read all of the cases, so am not sure if you have a 640 in 21 and 400 in 16 or if they pulled them both together. That could change the equation listed above if it is 1040, but the last term would be 1.0 as the whole well would be considered.
As Todd mentioned, there are other companies out there that would possibly offer more. Continental likes to buy up acreage where they have good wells, so that is an indicator that the well is good (and you might have more wells). I would think longer term than just Q1-Q2 2022 as the potential for longer term income is already indicated by the number of OCC cases that have hearings still pending. No promises that future ones will be drilled. Casillas posted the cases, but Continental bought them out. Not sure what their plans are, but they are drilling the first horizontal in multiple sections all around you. They drill the first well to hold the acreage and then come back to drill the additional wells in sections where the economics work. Oil and gas prices are more favorable this year than they were last year, so that is good.
Another tidbit is that in one of their investor presentations a while back, Continental posted that they were buying acreage and planned to make 4X profit on it. Personally, I would rather have the 4X profit to my family, so that would lean me a certain direction. You have to decide what is best for your situation.
It looks like Bowery is just west of my rights…but you say it looks pretty clear they’ll be moving east through section 21?
Amazing info…so I had been receiving small royalties in the past from Vitol (most recent) or Eneco and before that from Murphy for a lease on this section (21). The wells seemed to be operated by a Jimmy Chatham but I can no longer find any production numbers from him within this section on the otcportal. Should I read that as he has been bought out or something? I haven’t seen a check in quite some time, maybe 6 months, but they were small. The amount I was paid seemed to be .006 of the production value of oil/gas. Should I expect that if I do nothing the checks will resume in the timeframe you mentioned at the same percentage? Is it as simple as assuming that for every $1m of oil/gas produced I would earn $6k? And if Continental is planning to 4x their investment would it make sense for me to estimate my potential income to be 4x their offer over the long term? Thanks! I feel like I’m talking to a mineral superhero here.
The earlier wells had their own spacing which was likely smaller than the Bowery since they were vertical wells and not horizontal wells. Those wells were part of a waterflood unit called the Ratliff City Fusilinid Unit which would have then rolled up all the pertinent wells into the unit with yet again another spacing. You can also look up the waterflood units at the OCC to get info on them.
https://imaging.occ.ok.gov/imaging/OGUnitization.aspx You can type in your 2101S03W location in the LEGAL LOCATION box and find out which units you are in. That unit is in a particular reservoir.
The Bowery is permitted for three different reservoirs quite a bit deeper than the RCFU. It is spaced at different amounts according to the reservoirs that they are targeting. The final answer will be on your division order when it comes-about April or so. But the spacing is big enough and does cover your area is it is the white.
I cannot say for sure if they will drill more wells, just that they positioned the first well in order to be able to do so. The original operator did plan to drill another.
Martha, my grandmother is listed in those documents you provided…thank you. If for whatever reason there is no subsequent well drilled besides the one currently active, which does not cross below my area of mineral rights, am I entitled to royalties of any kind? Is everyone within section 21 going to be paid regardless of whether or not the well passes directly beneath their acreage? And thanks for providing information about the division order timeline, so other folks I spoke with were unsure about that.
Ah, that explains a bit as to why you did not get the pooling letter. Make sure that you have title to the minerals with the proper probate work.
Because the current well is spaced at 640 acres or higher at the deeper horizon(s), every horizontal well under that pooling will pay out according to the equation. That section is 640 acres and you have a portion of it. By being pooled, you are part of the “pooled unit” and every well drilled in that unit under the rules of the pooling will give you a piece of the royalties for the horizons listed in the pooling. That is why they want to buy your acreage. “They” want the current horizontal royalties and any future royalties.
I have acreage nearby and am starting to see the second horizontal well drilled in some of my sections. I am also held by shallow production from very old wells and pooled or leased on deeper zones. Not promising anything, just watching the activity pattern.
The new checks will have a different decimal since the spacing is different than the shallow wells. I think you will be pleased with the new volumes since horizontal wells perforate thousands of feet of section while those old shallow wells only perforated a few tens of feet. Your early checks will be very nice.
Horizontal wells act differently than vertical wells due to many factors. Their best production is in the first few months of the well, but then the wells can last decades at the lower rates.
Here is an example from a well near you. It has been online for about two years. You can see the high rates when it came on and the immediate decline (very normal). It was cut back for a short time (probably due to another well being frac’d close by) and then resumed. It was shut in during April-May 2021 due to the drop in prices. It has come back on line since then. The OTC website has the more recent production and it has improved a bit. I think they were being cautious as they opened it back up. 1.5 BCF of gas and 269,000 bbls condensate is pretty nice for just two years of production.
Chip: You can review land records back to 1999 here: https://okcountyrecords.com/search/carter#advanced-search
Martha is correct, if the title is in your grandmother’s name you may need a probate or other work done to show the current owners. You can check for previous probates in Oklahoma online, though if is is very old it might not appear.: :https://www.oscn.net/dockets/
Now it’s not still in her name, she passed away in 1983 and my father received the rights. He passed in 2012 and the pooling notification sent this year notifies “the heirs and unknown heirs” etc…care of my mother who has told me during probate she titled the Carter County rights in my name. I’m not sure we have a record of that. That would be super helpful. But at the very least it’s in my mothers name and she is still living.
And my mother did receive the pooling letter…got tossed aside while she was moving. In the past we hired an attorney to assist with probates and title searches. We may have to do that again?
You may be able to find the document in the Carter County online records putting it in your name. If you are getting royalties with your name on the check, then you are probably okay. You can look up the records at www.okcountyrecords.com Free to look, costs just a few dollars to print. Put it in your records!
Also check the website files Richard posted. You want to grab your grandmother’s probate, your dad’s probate and anything you can find that has this listed.
