17-8n-4w


#1

I have received multiple offers to sell my mineral interest in mcclain county. The latest and highest is 10,000/acre. What I don’t understand at all is why the offer is so hi based on what little I get in roality checks. Can anyone provide any insight as to why this may be?


#2

EOG has proposed 4 more wells in that section. You should be getting notices of the applications.


#3

Ok thank you. Any idea if my offer is legit? I don’t know too much about how this works.


#4

There is not enough information to answer that.
Any company making an offer is planning on making a profit.

EOG will spend between $10-12 million on a well. Based on two 640 acre units, that is a cost of about 9675 per acre. With roughly a 60% return they would have to sell $16,129 per acre of product to “break even”. Note:They are not it the business of breaking even. Even at a break even point, the owner would get about $3000 per acre based on a 3/16 RI lease. Mulitply that by 4 wells and you are looking at $12k per acre before your income taxes.

Buying your property for $10k an acre almost guarantees that the purchaser makes a profit on their investment. They are expecting to make much more than that if it is a legitimate offer.


#5

sorry for being so vague. Over the years my royalty checks have not come anywhere near what i could make by selling (providing it’s legit). I own 10 acres with 3/16 interest. This has been in my family for a long time and it’s never paid out much. I have no problem keeping it and waiting but would I ever see the amount I’m being offered to sell vs holding and collecting royalty payments over the years? Maybe that question can’t be answered. I"m trying to understand this so I can make a wise decision. Thank you for answering my questions.


#6

@eric4 True words spoken above by @Rick_Howell

There are multiple underlying specific reasons behind any given company’s offer to you. Yet, as Rick states, at the end of the day they expect to make a reasonable profit for the risk they perceive they are taking - same as any other type business (that plans to stay in business). As in any business deal, do your homework, get educated to the degree possible, use common sense, and make a decision that you believe puts your interest at heart.


#7

The reason that the value is so high is because of the new technology of horizontal shale fracked wells. McClain Co. lies on the edge of what is called the “SCOOP”. South Central Oklahoma Oil Province. Your royalty checks have been based on old vertical wells that were drilled in the '80s and have played out. A mile east, two miles east, and a mile south all have new horizontal wells that produce from a shale zone. Production ranges from 500 to 1500 bbl/d. It’s a different animal. That is why you have seen tantalizing offers to buy your interest. It’s real.


#8

Thank you all for your replies. Is it possible to roughly calculate what my future roality check may be based on the new technology? I’m trying to decide if I should sell and invest and more than likely double my investment in 10 years or so or hold it?


#9

Eric, read the note from Nigel! 1500 bbl X 30 days X $67 X your percent ownership! This would be for one month! Or it might be 500 bbl/day. Wait and see or sell and weep. It’s possible you will make as much as they’re offering in the first year. Production drops off, but I’m not sure by how much.


#10

This is making me think hold. The potential seems to be there. Any way to find out if and when the new proposed wells will be drilled?


#11

I just googled “drilling permits McClain County, OK” and came up with this plus other pages: More Drilling%20reports | !The Oklahoman News and Information | NewsOK.com


#12

EOG is leading the pack as a nonintegrated oil company as far as it comes to drilling. Do you know the acres of the entire lease? You mentioned you had 10 acres. 10 Acres of 640, or 1280? 2560? With technology being fairly new with frac lateral wells there could be several targeted formations over the years which has a small interest owner would add up over the years. You could make 3 times that in a few years. EOG actually spending 8 million a well. Look at EOG first quarter earnings last year (28mill$) to this years first quarter (386mil$). If I was going to pick an operator it would be EOG.


#14

Hi Eric. There are professionals out there that can tell you what your future royalties would be if you held on to the property. They can also give you a fair market value for your minerals if you are thinking of selling. I recommend these guys:

http://stackenergyconsulting.com/

They are oil and gas professionals (geologists and reservoir engineers) that can provide you with a report for your property. The cost should be about the same as a home appraisal.


#15

'm 99% sure I’m going to hang on to it. I want to see what it does. Thanks everyone.


#16

Thanks tom for the link, I’ll keep it for later if necessary.


#17

Eric,
EOG has already spud those wells. They are one of the best in the business and they have their ducks in a row!
You can look up the information on the OCC. Here is the first one.
http://imaging.occeweb.com/OG/Well%20Records/0055D28E.pdf
Wilson 0817 1H spud 4/28/18.
Wilson 0817 2H spud 4/27/18.
Wilson 0817 3H spud 4/14/18.
Wilson 0817 4H spud 4/15/18.
These are two sections long, so fit will take a while to drill and complete. They will probably do a zipper frac, so they will drill all the wells first and then frac them. Usually, a two section well takes about four-five months to drill. They are all from the same pad, so probably using the same rig and I don’t know what the total time will be. (There is also a fifth well which goes north, so factor that one in the time.) You won’t see royalties until six months after the the first sales.


#18

I’ll watch this, thanks for the link


#19

Dan6, I have 10/640 based an what my statements are showing


#20

Eric, I would suspect that there are multiple permits pulled in or around you. Look at the GIS Map Viewer and I would think it would become clearer.