How do you interpret the ‘compass points’ in location information for a lease, and what do they mean for how income is distributed?
As a specific example, the Unruh 4 & 5 lease in Kearny county, Kansas.
Location: C SE NE T21S, R35W, Sec. 13
What does the “C SE NE” mean?
My family owns the SE quarter of that section. And the producing well within that lease is located in the SE quadrant. But since the lease extends into other quadrants does that mean we share the royalties with those quadrants? Can you tell what percentage we get by the “C SE NE”?
Would the following be how to compute our portion?
1/3rd of the total (since SE is one of 3 locations given)
Plus
1/4 x 1/3 (my best interpretation of the “C”–which seems to say all 4 quads own an equal portion of 1/3 of the lease)?
So as owner of the SE quad, we own 5/12 of the royalty interest?
C se Ne means the center of the Southeast quarter of the Northeast quarter.
If the producing well is located in the Se/4, the description appears to be incorrect or there is a second well.
I am researching a package of about 20 producing leases and 10 nonproducing deeds. I am hoping that as I spend more time with the information I have received or dug up it will also become clear.
It seems like maybe i should start with rendition reports, and use KGS for confirmation and further research. Rather than starting with KGS.
There have been quite a few wells in section 13. As you can see on the map below, the NE quarter had at least seven. At one point it had 20 wells. Unrah 4 is the well in the lower right (SE4) of the NW4. It is the black oil well. The other black dot just to the upper left of it is Unruh 6. Unruh 5 is to the west of those two next to the red shut in gas well. It is the black dot with the arrow through it. Now an injection well.
The wells in the SE corner are the Miller wells.
The revenue is usually a combination of the net acres/actual spacing acres x royalty x % of perforations in your section (The last term is used for horizontal wells. For Example, 10/40 x 12.5 x 1.0=0.03125 on the Division Order and checks.
Regarding net acres, the smallest unit of spatial ownership (at least that I have encountered, and my experience is limited to Kansas) is 1/4 of a section–160 acres (1/4 of a 640 acre section). You may only own 1/10 of that quarter, but that would mean you are entitled to 10% of the applicable royalties for the 160 acres. So I think the “net acres” is always 160, or some higher multiple of it.
Would you equation sill hold if your net acreage is greater than actual spacing acres?
NEW QUESTION: Valuing nonproducing mineral deeds. Does anyone have experience with (or opinions on) assigning a fair value to nonproducing mineral deeds within a large purchase? I imagine this would be less than what an operator would pay for nonproducing deeds, who would be buying deeds on promising land with the intent to produce.
Researching on this site I noticed this: “I am a mineral rights owner only in Brazoria County [Texas]. A company has offered $ 200.00 an acre for 16 acres of mineral rights to lease for a possible solar farm. There has been no activity on this mineral right in over 30 years**
(that was posted under the topic “mineral-rights-offer-for-potential-solar-farm-build” in 2014)
$200/acre is much, much higher than what I understand producers pay for nonproducing mineral deeds in Kansas. Yet responses call $200 “woefully insufficient” (?!?)
Many mineral owners own far less than 40 acres. Just depends upon their generational fractionation or what was actually bought. Each well has its own spacing acreage. If you own more net acres outside the spacing acreage, then the equation pertains to the subset of the net mineral acres within the spacing acres.
Second question has many answers depending upon the purpose of the question-such as probate. Some areas are $1/ac if no one is ever going to drill. If nearby production, the value would be higher. A landman or petroleum engineer or mineral buyer would all have different answers.
Royalty and bonus amounts are determined by competition within the local market by reservoir.
With the nonproducing leases, we have agreed to put together an offer on a package that includes 10+ nonproducing deeds. Our interest in those deeds is only that we agreed to prepare a serious quote for the entire package. So we need to assign some value to them, and it should be fair. So to assign a value to the nonproducing deeds we’d like to find a fairly valuation method to apply to all of them (figuring with more research some would appear more valuable, some less, but it would more or less average out to fair over package).
Maybe we need to figure out if the nonproducing deeds are within producing fields, and assign a value equal to the average lease bonus? Then the deeds outside currently producing fields would be $1/acre?
Don’t short yourself on the $1 per acre. You do need to know where the acreage is with respect to current fields or active leasing. Bonus amounts are not public, but you can use www.texasfile.com to look for leasing.
