Re: Caddo county OK. 12-10-10
In the past years of leasing I have only been offered 3/16. With all the activity going on there is a offer on the table that includes 1/4 royalty @ $50.00 per acre with the next jump to 22% @ $1000.00. Would $50.00 be a norm for 1/4 ? I know bonus amounts aren’t public and higher royalty would pay off in the long run I’m just curious about the amont.
May I ask which company presented the offer. I have several tracts in the general area.
MK & P Energy, LLC
Oklahoma City, Ok
The address on their website is a UPS Store
There’s lots of businesses in that building zoom in.
Depends on where the wells are. Section, township, and range.
Pooling orders can give a clue to bonus amounts. There are quite a few pending near by, but no orders yet, so not helpful yet.
The bonus is a one time payment. The royalties from a 1/4 lease on successful well(s) over many years will usually far outweigh the difference in the bonus amount. You can always ask for more on the 1/4, but don’t expect too much. If you have received the pooling letter, then that is a pretty good indication of what will be offered at the pooling.
The math on 25% at $50.00 an acre vs 22% at $1k an acre doesnt add up. Are you sure those are the offers?
Yes I’m sure it’s on black and white.
If it is horizontal wells, then most likely the 1/4th will be worth it.
Its simple math. I’ll use 1 acre to make it simple. Assuming the full acre is included in the well, which it likely wont be, insert the allocation factor to figure it out. You can adjust any numbers you want to figure out your situation.
1 acre at 25% with a $50 bonus = $50
1 acre x 0.25/640 = 0.00039 interest in the well, on a 15 million dollar well = $5,850.00 + the $ 50 bonus= $5,900.00
1 acre at 22% with a $1000.00 bonus = $1000.00
1 acre x 0.22/640= 0.00034 interest in the well, on a 15 million dollar well = $5,100.00 + the $1,000.00 bonus= $6,100.00
Math changes if more wells wells drilled in the unit acreage. If 4 wells are drilled on the 640 acres, with 1 acre in the unit, then at 0.25 = ($5,850 X 4) + $50 = $23,400. With 4 wells and at 0.22 = $5,100 X 4) + $1,000 = $21,400. I do find the bonus difference odd for a single acre. Letter wording can be crafty as some parts can cite $ per NMA and other parts can be total $ for all net acres. Perhaps the description could be $50 per acre at 0.25 and a total of $1,000 for all the acres at 0.22. So if there are 3 NMA, then $150 at 0.25 vs $1,000 total at 0.22. Or if there are 5 NMA, it would be $250 at 0.25 vs $1,000 total at 0.22.
Im just responding to the mineral owners statement of being offered $50.00 an acre at 25% vs $1k an acre at 22%. Like I said, the math doesnt add up, but thats what the original poster claims the offers are. Of course the math changes if more horizontal wells are drilled, but given the area are you certain they will drill 4 more wells? Taking it at face value with the facts represented, you lost me on your math at the end and changing 1 variable but not the other. 5 mineral acres at $50 would still be $250.00, at $1,000 an acre it would be $5k.