18-7n-10e hughes county

Oklahoma Mineral Rights Hughes County, OK
1

I received a lease offer from Great Sky Partners. ($500 for 3/16 with 2-year option or $250 for 1/5 with 2-year option and 125% of original bonus to renew). After “lurking” around this site for a while, I am in awe at the scope of knowledge to be gained here. Is this a known company in this forum? I told the agent I wasn’t interested in the option but does anyone know if I have a chance of using the option as leverage to get 25%?

He sent the Exhibit “A” (terminology I picked up in this forum) and it has a Depth Clause and a Shut-In Royalty clause. What else should I request in this document?

I have taken on the administrative tasks for my family interests and am trying to organize and become a competent negotiator.

2

You probably do NOT want to take the 2 yr option. Too much can change in 5 years.

You want to make sure that the Exhibit A contains a limit on the shut in clause to two years cumulative on the shut in clause. You need a NO Deductions clause. Make sure they don't try to slip in a limited deductions for market value enhancement. You need a Depth Clause, commencement of drilling clause, Pugh clause, and do not warrant title.

If you want to friend me, I can go over the lease with you and make suggestions. Great Sky is the leasing agent for someone else.

1 Like
3

First Question: “RABSM”…what! Are you a Normal ARAB or a Head Hunting Arab? Need to know!

My options offered: $1100.00 per net mineral acre 3/16 royalty; $800.00 at 1/5th; $200 at 1/4th royalty.

Your statement…125% of “org” bonus to renew…sounds like BALONEY to me. I don’t understand what you are typing? First you say, 125%…then you say 25%…which is it? Most options are for a 3 (THREE) year lease. You are typing 2 year lease? Which is it? A-RAB!..recommend you get back with your LANDMAN and listen carefully …seek clarification of all you are tying here, then come back to the Forum and educate all of us…LC.

4

Hi RABSM,

Welcome! We (my family) are in the process of working with Great Sky and have had a good experience so far. We are not in your section, so I can’t compare the $ offer.

M Barnes is correct: you want a no deductions lease. The original one they offered had numerous deductions for gas production, so we sent them our “Exhibit A” and they did agree to all of our requests.

We did not agree to a 2 year extension, based on the great advice I received here. Very nice of M Barnes to offer to review and help out!

I don’t understand Leta’s comments, maybe clarification is needed.

5

Maybe a little translation is in order to clarify the original offer made to RABSM. Sometimes the oil field lingo is confusing.

Many leases are originally offered for a primary term-most often three years for a bonus and royalty option.

Various combinations are usually offered to start negotiations. In this case for this particular section, the offer was for three years and either $500/ac and 3/16th (18.75%) royalty or for $250/ac and and a 1/5th (20%) royalty. Included in the offer was a two year extension to the primary term of two additional years-which if it came into play three years from now would increase the bonus to either $625/ac and 3/16th or $312.50/ac and 1/5th royalty-only then in two years when the option is called into play-not now. (That was the 125%-essentially offering 25% more than now on a per acre basis.) What RABSM was asking was whether it was reasonable to use this 2 year option to try to get a lower per acre price, but perhaps get a 1/4th (25%) royalty instead. Good question. In other areas, one of the options is often $0/ac and 1/4th (25%).

My answer is that I do not recommend taking a two year option because it ties you down to five years and too much can change in five years (evidence-the last two months!). It is better to negotiate at the end of the three years because market conditions will change and success or failure in the area, prices, etc. will change. Also in this particular area a 1/4th royalty (25%) is very rare. You can ask for it, but you won't likely get it. If folks in the area have received that, then please share. The market can go up in five years or the market can go down-hard to predict! Given the market conditions right now, I would stick with the three year lease or even try for two.

If someone in the same section received a much higher offer, then folks on the forum would like to know to help them in their negotiations. Leta, If your offer is somewhere else in Hughes, then it might not be relevant to this discussion because the reservoir could be different, could be a major fault, could be oil instead of gas, etc. Offers can be quite different even if close by due to the geology and the play being developed. If you would like to share what section, township and range for the larger offer, then that would be helpful to other folks.

One thing that I have noticed over many years of handling leasing offers over many states and plays is that the very first offer from a company is likely to be one third to one half of what the final offers will be closer to the force pooling hearing. Not always, but in general. So it is better to be at the end of the leasing time frame than the first one out of the gate. I have learned the hard way! Also, the wording of the lease and the Exhibit A are even more important than the bonus/royalty pairs being offered. The bonus is tiny compared to the eventual royalty implications of the actual lease terms.

Also, this is a public mineral forum, so it is wise to be kind and limit discussion to facts and helpful items relating to minerals, understand oil & gas, etc. There are other forums on the web for opinion sorts of discussions.

6

Well said, M Barnes!

7

What is wrong with Leta? Why is she yelling?

8

Jen,

Not yelling, but could not follow RABSM’s percentages. I will say, however, that my dealings, thus far, with G.S.P (Great Sky Partners) in Ok. City, Ok. have been professional, and detailed. I have been most comfortable with options offered, and have a signed letter specifically stating $1100.00 Bonus per net mineral acre in Hughes County.

Comment to M Barnes: Your detailed analyses was informative, coherent, and persuasive. My minerals are in Section 21-7N-10E. As stated above $1100.00, Lease ‘Bonus’ per net mineral acre, 3/16 royalty, 3 year lease. I am, in fact, a novice, and will make every effort to stay informed via this helpful web site. It is my understanding that drilling will commence in 6 months by 'Petroquest Energy, L.L.C.

Since I signed with ‘Great Sky Partners’ two other offers have come in for the same area. Question to M Barnes: What is your understanding of the WOODFORD DEPTH CLAUSE? Please expound. Thanks.

9

Thank you all for taking the time to share your experience.

Just for the record, there are 5 siblings who inherited these interests (Ralph, Anita-me, Betty, Susie, & Mickey = RABSM).

Thank you Leta for the heads up in Section 21, we have interest in 7N-11E.

Thank you M Barnes for making sense of my inept ramblings. I will learn how to “make a friend” and you will be the first!

M Barnes said:

You probably do NOT want to take the 2 yr option. Too much can change in 5 years.

You want to make sure that the Exhibit A contains a limit on the shut in clause to two years cumulative on the shut in clause. You need a NO Deductions clause. Make sure they don’t try to slip in a limited deductions for market value enhancement. You need a Depth Clause, commencement of drilling clause, Pugh clause, and do not warrant title.

If you want to friend me, I can go over the lease with you and make suggestions. Great Sky is the leasing agent for someone else.

10

Leta,

Thanks for sharing. This is a good example of higher offers being three sections away for a couple of good reasons. S 21 is part of a different structure than 18 and has an old shallow oil field sitting on top of it. Also S 22 has horizontal drilling in it, so that makes 21 more potentially valuable at this time. S21 has 35 current leases on it so is more developed along the negotiating time line. Petroquest is active in that area.

S 18 is just a couple of miles away, but mostly has old dry holes or gas wells in it from older drilling. Looks like a new company (Continental?) or maybe Petroquest is coming in for potential horizontal drilling. But the negotiations are not as far along. Only 9 leases so far are filed, so early in the game. RABSM can use this information to perhaps try to get a higher value. Great Sky is the land company so knows what is going on. "I see you are offering "much higher values" just a mile or so away. What will be your highest offer for 18? I want that amount. Who is going to be the operator?" etc. are some of the questions to ask. It might not get the $1100, but you might get $800. Never hurts to try!

Also, RABSM, you don't have to lease. You can wait for the force pool which will get you close to the highest values offered in the nine block area surrounding you. This requires a little more patience as the FP will not happen until the well is about to be drilled (if ever). I can explain that procedure if needed. To friend, just hit the blue picture and follow the directions to add a friend.

Leta, I can explain the depth clause, but I need the wording on it first. There are several versions out there which mean different things.

11

Leta,

Thanks for sharing. This is a good example of higher offers being three sections away for a couple of good reasons. Section 21 is part of a different structure than 18 and has an old shallow oil field sitting on top of it. Also Section 22 has horizontal drilling in it, so that makes 21 more potentially valuable at this time. Section 21 has 35 current leases on it so is more developed along the negotiating timeline. Petroquest is active in that area.

Section 18 is just a couple of miles away, but mostly has old dry holes or gas wells in it from older drilling. Looks like a new company (Continental?) or maybe Petroquest is coming in for potential horizontal drilling. But the negotiations are not as far along. Only 9 leases so far are filed, so early in the game. RABSM can use this information to perhaps try to get a higher value. Great Sky is the land company so knows what is going on. “I see you are offering “much higher values” just a mile or so away. What will be your highest offer for 18? I want that amount. Who is going to be the operator?” etc. are some of the questions to ask. It might not get the $1100, but you might get $800. Never hurts to try!

Also, RABSM, you don’t have to lease. You can wait for the force pool which will get you close to the highest values offered in the nine block area surrounding you. This requires a little more patience as the force pool will not happen until the well is about to be drilled (if ever). I can explain that procedure if needed. To friend, just hit the blue picture and follow the directions to add a friend.

Leta, I can explain the depth clause, but I need the wording on it first. There are several versions out there which mean different things.

M Barnes: Thank you much for your offer to explain Depth Clause. Please expound on the WOODFORD Line that allegedly would allow me to renegotiate $$$ on royalty. Ok, since you say there are several versions I shall quote verbatim from my EXHIBIT A:…quote, “In the event this Lease is extended solely by commercial production beyond its primary term, then on such date this Lease shall terminate as to all rights below one hundred (100) feet below the stratigraphic equivalent of the base of the deepest penetrated formation in the well or wells located on the leased premises, or land unitized therewith. If Lessee is in the process of drilling or completing a well at the end of the primary term of this Lease, this clause shall become effective upon conclusion of such operations.” end quote.

M Barnes, I thank you for any illuminating input on the same.

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Just noted that Permits to Drill (Form 1000) were approved today, 1/15/2015, for Section 16-7N-10E and Section 15-7N-10E, 1 each. The surface location for both is in NW NW NW of Section 22. Maybe the results, when they produce, will give us a clue as to why Section 21 looks so good compared to some others.

Section 16 link http://imaging.occeweb.com/OG/Well%20Records/1DD2BE7C.pdf

Section 16 link http://imaging.occeweb.com/OG/Well%20Records/1DD2BE7F.pdf

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Leta,

Not sure what you mean by the Woodford line that would let you re-negotiate. If you already signed your lease, you are done and cannot renegotiate. I meant that RABSM can use your information to perhaps get a better offer on her acreage. That is how this forum helps each other out. We post relevant news and then others can use it to see if their offers are in the ballpark.

On the depth clause: It means that they hold the lease from the surface to 100' below the base of the Woodford (most likely in this case). I am attaching a picture so you can see it. I used the permit in 16 listed above as an example of the depths. This is a common depth clause. As a geologist, I am not particularly fond of it because it is rather vague, but sometimes it is the best one I can get.

This is my preferred clause because it can be measured precisely: (Usually I can't get it)

DEPTH CLAUSE: This lease shall terminate upon the expiration of the Primary Term as to all rights below a depth of 100 feet below the deeper of the deepest perforation then contributing hydrocarbons to production from any non-horizontal well or the deepest portion of the lateral then contributing hydrocarbons to production from any horizontal well, which non-horizontal well or horizontal well, whichever is applicable, is otherwise producing in paying or commercial quantities and is located on the Leased Premises or in any voluntary unit formed under the provision set forth in the body of this lease or in any drilling and spacing unit or horizontal well unit formed by the appropriate state governmental body. In the event Lessee shall have commenced the drilling of a well, pursuant to the terms of this lease, within the primary term, this provision shall not take effect until such well is completed. (This one would be approximately 80' less in this case.)

2a7b6455fb38b62c255c393f24d88a958503fde5.jpg1015×1200 217 KB



Leta said:



M Barnes said:

Leta,

Thanks for sharing. This is a good example of higher offers being three sections away for a couple of good reasons. S 21 is part of a different structure than 18 and has an old shallow oil field sitting on top of it. Also S 22 has horizontal drilling in it, so that makes 21 more potentially valuable at this time. S21 has 35 current leases on it so is more developed along the negotiating time line. Petroquest is active in that area.

S 18 is just a couple of miles away, but mostly has old dry holes or gas wells in it from older drilling. Looks like a new company (Continental?) or maybe Petroquest is coming in for potential horizontal drilling. But the negotiations are not as far along. Only 9 leases so far are filed, so early in the game. RABSM can use this information to perhaps try to get a higher value. Great Sky is the land company so knows what is going on. "I see you are offering "much higher values" just a mile or so away. What will be your highest offer for 18? I want that amount. Who is going to be the operator?" etc. are some of the questions to ask. It might not get the $1100, but you might get $800. Never hurts to try!

Also, RABSM, you don't have to lease. You can wait for the force pool which will get you close to the highest values offered in the nine block area surrounding you. This requires a little more patience as the FP will not happen until the well is about to be drilled (if ever). I can explain that procedure if needed. To friend, just hit the blue picture and follow the directions to add a friend.

Leta, I can explain the depth clause, but I need the wording on it first. There are several versions out there which mean different things.

M Barnes: Thank you much for your offer to explain Depth Clause. Please expound on the WOODFORD Line that allegedly would allow me to renegotiate $$$ on royalty. Ok, since you say there are several versions I shall quote verbatim from my EXHIBIT A:...quote, "In the event this Lease is extended solely by commercial production beyond its primary term, then on such date this Lease shall terminate as to all rights below one hundred (100) feet below the stratigraphic equivalent of the base of the deepest penetrated formation in the well or wells located on the leased premises, or land unitized therewith. If Lessee is in the p rocess of drilling or completing a well at the end of the primary term of this Lease, this clause shall become effective upon conclusion of such operations." end quote.

M Barnes, I thank you for any illuminating input on the same.

14

M Barnes,

Oh, my oh my…how nice it would be to know what you know. Relieved that you were familiar with WOODFORD. My naivete showed by using the word “line”…just my Okie articulation. :slight_smile: The schematic was most helpful, and certainly gave me perspective. I had a zero picture in my mind of the value of S21 until you pointed out information on adjacent Sections, i.e., S22’s horizontal drilling and the supporting schematic re Depth Clause. As a ‘lay’ person, one’s imagination can exceed the hydrocarbon find. I have every reason to believe that 'Great Sky Partners will do horizontal drilling. I do ‘not’ know if it is S.O.P (standard operating procedure) or not to send the Lessor, I Leta, documentation re “Pooling” ‘Before The Corporation Commission of the State of Oklahoma,’ with all the names of all interested persons including myself, and other relatives. This is the 2nd document received from CrutchmerBarnes, Tulsa, Ok. I thank you for your detailed explanation response on ‘Depth Clause,’ and Schematic. M Barnes, did you find ‘Any’ weakness in the Depth Clause Version that I spelled out verbatim?

Lease Bonus monies $$$ should be coming my way no later than 10 February. Such timeliness leads me to deduce that PetroQuest is anxious to drill. Now, perhaps, that is only speculation on my part, but I will necessarily “turn the stone,”…if you will. M Barnes, thank you kindly for your detailed and illuminating information and schematic. That took your valuable time. It is appreciated.

For RABSM: Your pen name. I think it is ‘cool’ that each letter of your pen stands for your siblings.

15

Leta, the Woodford shale is the main target in your area. You are in the Arkoma Basin portion where most of the production is gas.

http://imaging.occeweb.com/AP/CaseFiles/occ5168818.pdf This is a map of the proposed well in section 22 and why your acreage is perceived to be valuable. The Woodford is about 120-130' thick in Sec 21. (Isopach essentially means "thickness"). Great Sky will not be the operator to drill. They are a land company. Petroquest is most likely to be the operator to drill. When the well is permitted in 21, perhaps a similar map will show up with the location on it.

As to your question about pooling, if you have leased, then you will not receive the pooling info. You can find it on the OCC website though. I am attaching a copy for you. http://imaging.occeweb.com/AP/CaseFiles/03092466.pdf

The hearing is supposed to be 1/26/15. If you have not leased, then you should get a copy of it. After the orders are given, the royalty owner will have 20 days to make their choice of royalty/bonus selection (only if they have not leased prior to the hearing). If you want the names of the interested parties in 21, then most of them will be on the Location Exception document. You should get a copy of it mailed to you, but I attached it here.

http://imaging.occeweb.com/AP/CaseFiles/occ5167167.pdf

http://imaging.occeweb.com/AP/CaseFiles/occ5172261.pdf this is from the spacing document and also has a list of names. If you see anyone that is incorrect, missing a current address, etc. then contact them quickly.

On the Depth clause, it has no weakness as far as the drilling company is concerned. It works just fine for them. As a royalty owner, it is not the best one out there, but if you only have a few acres, then you have no negotiating power to get it changed. It is adequate and normal (but not perfect). Don't sweat it.

The lease money is supposed to come to you quickly. It has no bearing on the drilling time frame. Sorry :)

However, the pooling hearing indicates that drilling might be within a year from the date of the order. It could be 180 days or 365 days. The order will state the required time frame. So that is good news.

16

M Barnes, can I copy & paste these maps into my browser? I couldn’t get them to open from your post. I’m interested in your discussion about Section 21 and 22; 21, T15N, 11E and 22, 15N, 11E. Those are the ones the Company’s Landman was first interested in, before knowing about the others I have. I don’t know if my Section 21 and 22 are far or close, relatively, to what you are discussing. ?? I have an old Mid Continent map showing some old wells operating or plugged from back in the 80’s.

M Barnes said:

Leta, the Woodford shale is the main target in your area. You are in the Arkoma Basin portion where most of the production is gas.

http://imaging.occeweb.com/AP/CaseFiles/occ5168818.pdf This is a map of the proposed well in Section 22 and why your acreage is perceived to be valuable. The Woodford is about 120-130’ thick in Section 21. (Isopach essentially means “thickness”). Great Sky will not be the operator to drill. They are a land company. Petroquest is most likely to be the operator to drill. When the well is permitted in 21, perhaps a similar map will show up with the location on it.

As to your question about pooling, if you have leased, then you will not receive the pooling info. You can find it on the OCC website though. I am attaching a copy for you. http://imaging.occeweb.com/AP/CaseFiles/03092466.pdf

The hearing is supposed to be 1/26/15. If you have not leased, then you should get a copy of it. After the orders are given, the royalty owner will have 20 days to make their choice of royalty/bonus selection (only if they have not leased prior to the hearing). If you want the names of the interested parties in 21, then most of them will be on the Location Exception document. You should get a copy of it mailed to you, but I attached it here.

http://imaging.occeweb.com/AP/CaseFiles/occ5172261.pdf this is from the spacing document and also has a list of names. If you see anyone that is incorrect, missing a current address, etc. then contact them quickly.

On the Depth clause, it has no weakness as far as the drilling company is concerned. It works just fine for them. As a royalty owner, it is not the best one out there, but if you only have a few acres, then you have no negotiating power to get it changed. It is adequate and normal (but not perfect). Don’t sweat it.

The lease money is supposed to come to you quickly. It has no bearing on the drilling time frame. Sorry :slight_smile:

However, the pooling hearing indicates that drilling might be within a year from the date of the order. It could be 180 days or 365 days. The order will state the required time frame. So that is good news.

17

Mary, How odd that they don't open. You might try a different browser like Chrome or Firefox. I switch back and forth when something doesn't work. You can hand type them in. Sometimes that works better.

Also, your sections 21 and 22 in 15N-11E are about 40 miles away from these and not in Hughes county. The first link is a really good interactive map. Can see your house on it! Don't turn on the section-township-range until you zoom in pretty far or it will take forever to load. Use the slider bar at the top to choose between streets, topography, etc.

The second one is an explanation of the OK land system.

http://gis.deq.ok.gov/flexviewer/

http://www.owrb.ok.gov/supply/wd/pdf_wd/land_survey.pdf

Let me know if you need some help with your area.