Looking at the GIS map it appears there is a leg running into Section 4. I have mineral rights in Section 4 located as Lots: 5,6,10.11 and 12. And all of the SW 1/4. The attached is a pdf screen shot of the area in question. Thanks Oil.pdf You can zoom in to see things better.
Mitch, if you have mineral acres in section 4, the answer is yes. If you were never offered a lease, I would think twice about signing one. At 122,974 barrels of oil cumulative as of last march and being a cheaper well drilled in mid 2009 after oil prices were recovering from the horrible petro products crash of early 2009, I would say that this well had paid out, that the average price per barrel probably exceeds $85 per barrel.
The well has also declined about as far as it is going to for the appreciable future and the production decline curve is almost flat for the last 6 months and the gas production looks level also. On top of all that, this well has not had a pump put on it because it is not needed which makes this well very cheap to operate. I have a handful of wells like this. I suggest you think outside the box, consider not leasing if you have not. Consider a farm out deal [where someone would participate on both of your behalfs and you would receive considerably more than than royalty and also still be an owner with the tax benefits that brings], non-consent or possibly participation if you have the cash and the number net acres warrant it.
Thanks RW.
How does a person start a "farm out" deal. This is all new to me. Thanks again.
And looking closer, I also have the NW 1/4 of Section 9.
I have not actually done a farm out deal but I have been a non- consent, force pooled, carried interest and it's been almost completely painless.
To make a farm-out deal, providing you are not leased, I would look for an investor who would like to invest in a good already paid off well, meaning that he would write the operator a check for the participation and the operator would write you each a check. Essentially, you would be taking on a partner, you put up the mineral acres and they put up the capital to participate in the well, and also the experience to deal with the operator to look out for both of your best interests, because operators do make mistakes and sometimes they play little games to shave a little extra profit here and there. Having an experienced partner who knows the oil business looking out for your best interest because they are looking out for theirs at the same time, could be valuable. I think you could reasonably expect 30% to 33% of the profit which to you would be 50% more money than you would receive from a lease. As I said, I have not actually done one of these before but I know it's doable if you had enough acres to interest someone in the first place.
I have gone non-consent which gives even greater upside in my opinion but you only receive 16% royalty until the well is paid for and recovers a 50% penalty of the actual cost of drilling and completing the well. Once the well and penalty are paid for, you receive 100% less cost of production probably a couple dollars per month per acre to run your well. I have a well much like yours that costs $1.38 an acre per month to operate as a free flowing well. If the operator puts a pump on it and it starts costing for electricity, I'm ok with that because it means more production also. I put back 50% of my proceeds for operations and rainy day but that is probably overkill. If you had the cash to participate in your well, that is what I would do to avoid the risk penalty. The 50% risk penalty sounds horrific but is really not, in my opinion because it does come to an end and from that point forward you receive 100% less costs, much of which is deductable. if your well only made three times the amount of money it cost to drill, that should still be equal to 50% royalty from your acres. You are in a great area and I think you will do better than that. Newer wells that are going to be drilled in your area will probably be even better producers due to better well completion techniques.
Don't get in a hurry, you have plenty of time as long as the operator has not sent you an offer to participate in the well. For more on non-consent / force pooled / carried interest, you can search what I have written. There will be some people arguing against it also and that is fine because if you are susceptable to vapors, you probably shouldn't have ownership in an oil well. It is also work, not a huge amount of work but you need to keep an eye on your business and continue to learn your business, because what are you going to do when they come drill 3 more wells on your spacing, think about what it's going to mean to you? If they don't drill them all at once, you may make enough off of the previous ones to participate in the later ones. You also may have more strings to your bow, the Bakken probably isn't the only produceable formation so you could eventually end up with 8 to 12 wells. You have a fascinating business opportunity before you. I would research it throughly before I leased, rolled over and went back to sleep. If you lease in that good area, it's a safe bet that that lease is not going to end in your lifetime if you are mid 20's or older. If you only have a couple acres I would look at participation or non-consent.
You make your luck in this business by being informed. I wish you the best of luck.
Frankly
If you're still looking at the board,R W is telling the truth you could get more than normal if they have never sent you an a.f.e. Which is basically the operator telling you how much they expect to spend on the well(it may be inflated)Its thier offer to you to participate in the well(pay your part).If they couldnt find you and didnt create a mineral trust,the sky is the limit.If you choose not to participate.Well not exactly.you will have the right to be a carried interest, you could participate or are in a very leveraged place as far as leasing.The option of "farming out" is also attractive as far as a no money down option.It should turn out much better than a lease.It wouldnt scare me to invest in this situation,its kind of a no brainer.I would expect the investor to split the profit of what he put up vs the already produced minerals. From that point on I would expect to get a 30 % to 33% check.That is a true 50% increase over what you would get without a seasoned professional doing your negotiating.I doubt an oil co. would offer that kind of money because it would set a precedent wether you had a proffesional or not.They might offer you a larger signing bonus,thats because the money is in the long run. The long run is true wealth. These are my thoughts and I dont have facts to back them up.You make your own luck...good luck everybody..TK
Sequoia 24-9H has produced 124,668 bbl oil as of April, 184,109 mcf gas, probably half of which was sold and at about $5 a mcf. I will hazard a guess that your oil has sold for an average of $75- $80 per barrel. It's good that your oil didn't start selling until 9-25-2009 because the price was much lower earlier in the year.
I'm still here.
I have been in contact with the Landman from Conoco Phillips. He stated that they could not tell who the mineral rights owners were due to my mother passing away. Yet, they knew my mothers name and have been paying my Uncle since the well went into production.
I just don't think they tried very hard, or maybe not at all. In this case would I be able to collect back interest from them for the last 3+ years that the well has been in production?
Mitch, unless you probated your mothers estate in the state of ND and recorded the documents in the county that contains the minerals years ago, no you will not get interest. They get to ask that much of you. If your mothers estate was probated elsewhere it's usually fairly easy to do the ancillary probate in ND. The first step would be to find out the title curative requirements and then I would look for a lawyer.
If you have not leased but you intend to, and they want you probate your mothers estate, I might call them up and say "Gee, if I have to go to all that trouble and shell out all that money [ND lawyers are expensive now] I guess I will just have to keep it and find a way to make more money off it than leasing" they might decide, just for you, that they would pay you bonus and royalty on an Affidavit of Death and Heirship, that you fill out, have a disinterested party who knew Mom sign in front of a notary and that you record in the county that contains your minerals. It's totally up to them whether they pay you or not, until you dot every i and cross every T.
Your well is up to 124,668 barrels now which is not bad for a well that has never had a pump installed, also one drilled before the modern completion techniques have improved to the state they have achieved today. Your well was "spud" commenced drilling 6-14-2009.
The producing well from the spacing just south of yours drilled in the middle of 2010 and having a pump put on it in early 2011 has produced 278,236 barrels of oil. Newer completion techniques and a pump can make alot of difference, three more wells are awaiting fracking in that spacing also.
Thanks again RW.
My mother passed prior to my father so he inherited her holdings. My father had a Revocable Living Trust which included how the estate and property were to be held or distributed when he passed on in 2002.
There is no probate needed in either State when there is a Living Trust.
The Hess Company found me and my siblings without a problem....Conoco, not so much.
I'll give the Conoco Landman a couple more weeks to see what he has to say. I mailed him the Certificates of Death for both my parents and my Fathers Living Trust about a month ago. I may have to lawyer up. If so, do you have any recommendations?
Mitch, ND is a disaster area for lawyers from what I can tell. I don't have a recommendation because my lawyer up there got elected to be a judge. I wish you well if you have to search for representation.