Looking for information. A friend received an offer to top lease some acreage he owns in McKenzie County. I am looking for current rates. The offer is 2K and 1/5. Anyone have any luck with limiting unit size? ND is not my area of expertise, so any other info that you deem important would be greatly appreciated.
Rick
Depending on where the acres are located, $2k could be way low. You will have no luck limiting unit size. In the early days there were 640 acre spacings but the state sold us down the river for 1280's and now the operators can ask for and receive 2560 and 5120 acre or greater spacing if the operator controls that many contiguous sections.
If someone is interested enough to start playing the top lease game, I would think that the $2k is low, they want to tie your friend up before his acres hit the open market and he starts getting competitive offers when he has the maximum bargaining power possible as a free agent.
Your friend need not lease at all, non-consent can be extremely attractive in North Dakota with better producing wells, 50% risk penalty and never having to pay anything out of pocket and average weighted royalty in the spacing or 16% whichever the operator elects until the well is paid off. Your friend should look at NDCC 38-08-08. If nothing else, the non-consent makes an excellent bargaining chip for the informed.
Thanks, I will read up on NDCC 38-08-08.
R W, does the 50% penalty mean that the non consent owner comes in at 50% payout as a WI partner. I know in TX participated minerals can go non consent and come in as working interest at payout. Is that waht 38-08-08 is saying. I read the statue and am confused with all the risk penalty talk.
Richard, the 50% risk penalty is in addition to the actual cost of drilling and completing the well, then the mineral owner becomes a working interest partner and receive 100% of production less the cost of production. The mineral owner would receive 16% royalty from the very first barrel, until the well and penalty are paid off. I am doing this myself and I consider it a good deal. If the productive capability of the acres is average to poor, I would consider it less attractive.
It is! Perfect, thanks for explaining that. So its like coming in at 150% of payout but you get paid royalty. I guess the only loss is lease bonus. Which would be recovered easily with an 8/8ths payout of production so long as the well is good.
Yes, 3/4 of the royalty you would have leased for until the well recovers the 150%, never any out of pocket money at risk. Then too, my operator sends me the occasional lease offer still. I see it more as keeping options open as opposed to closing all options with a lease.