Some background –
Mineral rights owner in Williams county
Not Leased – received lease proposal a few yrs ago (change of address since then)
Well recently completed in my section
Do I have any options or leverage for negotiating lease?
need more details before I can chime in with my 2 cents.
1) have you received your certified letter giving you the option to participate or lease?
2) The amount of minerals you have?
lets start there.
Andrew, thanks for your response
I own 5 net mineral acres
I have not received the letter you refer to due to mailing address change
Cal:
Would you please specify your Township/Range/Section? With this information, I can better figure out what's going on in regards to your minerals. Also, provide any additional info such as the operator name, etc.
Cal said:
Andrew, thanks for your response
I own 5 net mineral acres
I have not received the letter you refer to due to mailing address change
Charels, Thank you for your response
Township 157N Range 101W Section 10. Do not know the operator's name
1) check your title...if it is good then, 2) contact the operator of the well and give them your address.
Is there a chance that the letter went to your old address and someone there signed for it? ( common for an ex to do and not tell you or a lazy ex room mate) this happened very recently to one of my clients, and the operator said they were not going to send another letter.
That letter is going to start your 30day clock so hopefully they haven't attempted to send it to you yet.
I am not advising you to lease, participate, or be carried, but 5nma is a manageable amount for any of those choices. a $10 million well would cost you about $40,000 out of pocket to participate. $60,000 out of royalties if you are carried, and about 80% of all your future oil revenue if you lease, but of course you get a one time bonus per acre if you lease.
no matter what, the operator has to make the attempt to lease from you...but don't wait around to long otherwise you will be forced pooled, and carried, and eventually become a working interest owner and that isn't for everyone.....but 5acres is a nice size when it comes to risk/reward choices....
still need a little more detail to provided with anything more than this long winded overview.
My NDIC GIS map doesn't work on my computer...but I am guessing that your operator is Petro-Hunt LLC.
someone brighter than I will be by shortly I am sure and tell you, but in the meantime, I am thinking the well was drilled in Section 3 above you and went south into your section.
Thanks, On Tuesday, I did contact the company who sent the original lease offer from ~2 yrs ago. The landman I spoke to said they did mail the letter a few months ago. I have no reason to believe or be suspicious about someone signing for it (unless the oil company mailed it to themselves ;).
He also stated that since the well is complete, my options have changed and i would need to speak to his colleague. so, i'm expecting to hear from him. i provided my current address as well. he laid out three options 1. consent to lease 2. non consent 3. participate - he stated that option 3. would cost $315k up front. he said their company has been offering 3/16 royalty. we didn't talk about bonus for option 1. or 2.
That makes sense. forgive my confusion about the meaning of "operator". Petro is the company i received the old lease letter from and is the company i spoke with Tuesday. I actually mentioned that i didn't see the well on the map and he said the map is not always current (?). but, maybe there was some misscommunication around the exact location.
Cal:
The well you are referring to is as follows: Petro Hunt LLC; King 157-101-3B-10-1H; located in the Otter Field. Looking at the GIS map, two wells were drilled possibly off the same pad as the the well dots are fairly close. The other well appears to be to the North while yours is to the South. The other well is as follows: Crescent Point Energy US Corp.; #22568. Your # is 22589.
$315,000!!!!!!!!!! could you tell me the spacing for this well? I thought it looked to be 1280acres....
If that is the case then no way is your participation share $315,000.......and I wouldn't take less than 20% royalty.
Let us know the size of the well spacing.
Andrew:
According to the GIS map, this well will be in 1280 spacing unit. It was drilled as a wildcat, came out on the Dockets on 3/15/12 under Daily Report # 16064.
Thanks you for all the information. If i don't like the royalty offer, what leverage do i have to negotiate? If my participation share/cost is low, i will consider and take on the risk/reward
Cal:
I would take this one step at a time. First, see what they offer you and proceed from there. Don't make a hasty decision about this matter but make one that will benefit you the most. This well is in the cofidential stage and no downhole info will be released until the 6 mo. waiting period. The company does or will know what kind of well this will possibly be so therefore, they have a little more info than you. Again, negotiate with an open mind but don't get in a hurry to sign anything until you are sure it is the right decision. The main thing, be sure you are satisfied with what you are getting in the deal.
Cal said:
Thanks you for all the information. If i don't like the royalty offer, what leverage do i have to negotiate? If my participation share/cost is low, i will consider and take on the risk/reward
perhaps i'm talking too much in specifics. my real question is do i have any leverage. can they take it or leave or force pool me at this point
Cal:
In my opinion, I would try and negotiate a lease with this operator and not worry about the hidden expenses that will come with participation in the well. This is my opinion but another factor is that you have only 5 NMA in the unit. I have never paricipated in a well and have no experience about what is entailed over time. RW Kennedy, another individual that posts on this board, has been down this road and knows the facts about what to expect in the event you want to participate. He should be able to provide a great insight into your situation. Hope this bit of info helps.
Cal said:
perhaps i'm talking too much in specifics. my real question is do i have any leverage. can they take it or leave or force pool me at this point
I really am interested in hearing how 5acres in a 1280 spacing could cost you $315k for your share of the well.
Somebody do the math and tell us how expensive that well would have to be. If the landman told you $315k to participate he is a bold face liar. I will go on record with that. In fact I just did.
Thank you Charles and Andrew. I'll clarify the $315k when (if?) I hear from them again.
I still don't understand how I'm going to negotiate (a lease). Can't they say bugger off - if you don't take our deal, you'll eventually be force pooled
Cal, at this point it may be in your best interest to string things along. You say the well is drilled, but is that drilled fracked and producing ? It would be great if you could get a hint of how the well will do. if there are other wells nearby they would be an indicator. $9k per acre would be an expensive well in ND, one they had problems with and had to do extra work. The operator can't force pool you before giving you an opportunity [in writing] to participate. In that case the operator will send you an AFE, an itemized estimate of the costs of drilling the well, after receiving it you will have 30 days to decide. Most importantly, get help if you need it, study and act with deliberation, don't rush into anything. If a landman really told you that your 5 acres part of the well would cost $315k, I would call his office and say I couldn't work with him after that, that you would keep laughing in his face and be certain that every word out of his mouth was a lie, and since they are going to lie to you that all negotiations will have to be by mail. If you can string things out you may get a look at your well and that could make it an easy decision. Send me a friend request if you want to discuss anything in private.
Cal.......take R.W. up with his offer......he knows his stuff.