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Oil company contacted our family to drill on property where my family owns the mineral rights, but we aren't sure what has occurred since then.

My grandmother and my mom were contacted in 2014 about some mineral rights in Payne County, and Devon wanted to put a horizontal drill on the property. This is shared among a group of cousins and their heirs. There has been little information given to us, so I assumed that nothing came of it, but want some clarifcation. I did some research on my own, kind fumbling around on the internet, and I think I found it, but am not sure. It is Section 23 Township 20 North Range 3 East. What I found said it was plugged and abandoned, does this mean that nothing was there at all? Also, i imagine it is expensive to drill unless you are pretty sure something was there. Lastly, do they pay a lease before they drill or after?
Any assistance would be helpful.

Thanks,
Allison

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The wells you see on your section are older; one was drilled in the late 1950's and the other in the early 1980's. They are now plugged and abandoned, meaning at one point they produced oil and gas, but the then-targeted reservoir has since run dry and is no longer economically feasible to attempt to restore production. Don't let that worry you though, both of these wells were drilled to a depth of approximately 4,150 feet, so there may be some interest in leasing and developing your deeper rights. I'm not too familiar with the Oklahoma geology layout, but I know down in West Texas operators are drilling down to 11,000' into the Wolfcamp formation.

I don't see any permits or anything filed since 2014 by Devon in your section, so you are correct that nothing has come of it. However, White Star Petroleum operates some horizontal wells near you, so that's good news.

As far as drilling costs, this is an extremely capital intensive industry, meaning it takes a lot of up front investment. Drilling is very expensive, with horizontal wells costing millions of dollars, so operators try to be very certain about how much oil/gas lies underneath a particular area.

As far as payments to you, the mineral owner and potential lessor, you will not receive any sort of royalty payment stream until a well is drilled and production is established. However, you WILL receive a "bonus" up front for signing a lease. The lessee should pay you a certain dollar amount per acre that you own. For example, in West Texas we lease minerals for $5,000/acre, which we pay to the mineral owner/lessor right away. If we don't drill, they keep the $5,000/acre and can sign a new lease and again receive a bonus payment once the current one expires. If we do drill and hit oil, then they keep the $5,000/acre bonus still, AND receive monthly royalty payments. Please note that the bonuse amount per acre will be similar to what the going rate it for your area. $5,000/acre is from West Texas, but I am not sure about your area.

So, to sum it up, your section is not producing and I do not see any active permits. If you sign a lease, you get some money right away called a lease "bonus", which is yours to keep. Then, if a well is drilled and production established, you will also receive monthly royalty payments. If a well isn't drilled, then the lease expires and you can do this all over again.

If you have any questions, let me know.

Thanks,

Blake Paschal

Thanks so much for your very helpful response. We have not heard anything from the side of the family who originally let us know about the potential drilling, but how would I know where to find out if a lease was signed at some point after my grandmother was originally told. Would each family member have to sign or could a family representative have signed?

Thanks,
Allison

Allison,

One way to check for any subsequent leases would be to conduct a search in the Payne County public records. You would need to find an online service to conduct this search, and you would want to search your grandmother's name as well as those individuals who inherited her interest. If you are unfamiliar with searching the county records, then I would advise you to contact a landman to do so for you, although it will likely not be free.

In regards to who has to sign the lease, it depends. If your family appointed a certain individual to act as agent and/or attorney-in-fact on the family's behalf, then he/she would have full power to sign leases. However, if no such power was appointed, then each family member who owns an interest would have to sign individually.

As far as determining net acres, that is not a simple task. If you know what the total bonus was that your grandmother received, as well as the amount per acre, then I can use simple math to determine the net acres. However, if you do not have this information, then the only way to figure out the answer would be to run title on the section, which would again require hiring a landman and could take a few days to a couple of weeks to determine depending on how difficult the title chain is.

I have access to DrillingInfo.com, which is an extremely useful, but very very expensive tool. That said, I can do a quick search to see if there are any subsequent leases after your grandmother executed one. I just need your grandmothers full name, as well as the full names of her heirs. If you do not wish to share such information on here, then please feel free to send them via a private message, or email me at blake.paschal@paschalland.com.

Thanks,

Blake Paschal

Also, can you help me decipher how many acres that is?
Also--if you look at Mineral Rights Forum September 20--the Midlands Reporter has Devon in their New Mexico wildcat now in Lea County at Cotton Draw Unit #507/#508, Allison.
Thanks for your response, but I am confused where to look. Is there a topic title?

Allison

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