Drill and cap and wait may make sense for verticals, but to drill a horizontal and set casing and cap would mean probably $3+ MM in the ground and not in the bank making money. Or being used elsewhere to generate cash flow.
Plus capping a well and having the lease go past primary term would be a problem - shut in royalty payments may help retain some of it but losing lease and/or being subject to landowner lawsuits to "release" are a real possibility.
Just thinking
Hello all! Good to see the comment board becoming active again, too bad it is on a low note of the current oil pricesā¦. Joseph thank you for the number and Jimmie I will email a note to you and then share what I can with the group. Encana has T2N-R3E pretty wrapped-up with 6 drills! Not sure if any have begun or not. In my case, the royalties I own seem to be with the owner of the surface (12.5%), not Encana- I am not even sure if the current landowner has even leased or not!
Jimmie, maybe you will be able to helpā¦.
Oh, speaking of offers to purchase royalties, I was offered $7500 early last year for mine, this preceded any publicly known EnCana petitioning of T2N-R3E
From Douglas D. Barron
We've had three offers, one for $13,000 each for the "mineral rights" for 10.75 "mineral acres" out of a 43 "gross acre" tract and the second for $3850 per "mineral acre." Both of these were to SELL our rights, which we will not do. Third offer on this tract was from a landman to lease the10.75 acres for $150 per acre for 5 years with a 5/32% royalty (this was "up," he told me, "from the "normal" 1/8%)". I didn't consider 1/8th normal and the royalty and price per acre too low. This was a low-ball deal and we countered and he couldn't increase it. The accepted offer, came from EnCana, was for $250 per acre (to each of us) for 30.75 acres out of the larger, 123 acre tract, with a 20% royalty to be paid, if/when drilled and successful. Plus renewal for 3 more years at the same terms, at their option. They told me if the area proved to be as good as it looked they'd lease the smaller one from us at that price&terms as well. That offer on the larger tract, we considered "fair" and we accepted. It expired the last day of 2014. We've had no word from them , but I've been told by one forum member they probably decided to not renew last summer or early fall... another member told me to just wait, or call and ask what they're going to do, they may just send us the renewal checks in a month or two. They've done that before, apparently. I called and they told me they will call me back next week and advise the status. The first three offers to purchase were on the smaller tract. EnCana leased the "mineral acres" of larger tract. So, we wait and continue to hope for the best. Good luck to everyone! ...and be careful with your rights and with whom you deal and don't give anything away... We've found the smaller, independents are much tighter, and more restrictive. EnCana, being much larger and better funded, are more realistic and more fair, so far. I reckon "caution" is the word, in any event. AND, getting good advice from someone with experience is more than just helpful. Jimmie was very helpful to me and I really appreciate his info and time.
Doug, great info!!! Where is your tract? I have 10 out of 49, in sec 30 of T2N-R3E... I guess my original open question is with the horizontal fracking, how does that differ from the vertical royalry rights
From: Doug Barron:
I don't know the exact location and believe me, I've looked over the maps that are available on-line. The legal descriptions are: T (township) N (north)--R4E (east) . TN-R4E, Section 15, NE/4 (I'm not sure what the NE is, other than probably it is, "northeast" and I'm unsure of what the R/4 means... perhaps, "right-northeast quarter?". Plus we have another in TN-R4E, Section31, further described as, NE/4, SE/4. The Section 15 is the 10.75 acre tract. The 123 acre lease with EnCana is written to encompasses both the section 15 and 31. The cover letter states it as:
T2N-4RE, Section 15, NE/4, Section 31, NE/4, SE/4. Since I sent the previous comment, I've learned there have been 4 wells approved in Sec. 31, T2N, R4E and the dates are all the same 11/19/2014, all named "Pearl River." AND, in Sec. 15, T1N, R3E there are another 4 wells, same date, same name. Doesn't seem they could be too far away. If you google "EnCana news for T2N-R4E" the fourth entry down is: [PDF]2015-OPD-0277 ENCANA OIL & GAS (USA) INC (OIL ... you can view the list of wells permitted in the area. I live in Texas and fracking involves the horizontal drilling and allows for increased probability of getting into additional formations. I had a lease with a gas company on my 25 acre tract (where I live), and they drilled a well at the 7000'-7500' level, about 1/2 mile away and the pipe ended up about 110 yds or 330' from my property line... that just happened to be 1/16 of a mile. That's arbitrary minimum distance they can go, and NOT include the property in the pool. It's producing gas today and I'm not part of that pool because of the distance. I've been told by a number of people, when it was fracked, the company more than likely fractured the formation into mine, too. But there's nothing I can do about it other than be aware they're probably getting gas from me, too. I don't know what the distance limitations are in MS. I have a very small interest in an oil field in Lousiana. There, the wells are in a huge salt dome and they drill vertically into the dome and out comes the oil. That field is approximately 60 years old and when the oil depth gets too low, they'll pump water into and it raises the level and production resumes. I would think that in a fracturing operation, when production goes down, they will "re-frack" the formations and the same is true. Fracking, when possible, is what brings old wells back to life. I think setting the 1/16 of mile as the minimum distance you can drill next to a different property and NOT include THAT owner, should be not legal. But, that's because I am one of those owners and I feel that takes an unfair advantage of owners not included in the "pool" by a 330' distance ... but, the state essentially does what the oil companies want them too. They don't want the pie to have too many in it, because it reduces their take. I don't know if that answers your question or not. You can ask a land-man about it. I happen to catch them when they surveyed MY property here Texas and saw the map excluding me. The "Railroad commission" in TX controls all the oil and gas exploration and they have on-line maps of every well and where the drilling goes and scale how far is available. I have not yet learned what State agency controls MS oil and gas drilling and if they have a site like the TX RR Commission has and to what detail is the information available.
Ralph,
If you own mineral rights under the surface of a surface land owner. A lease will be offered to you only for your mineral rights independently of the surface owner - He/She will not be a player in a lease establishment of your mineral rights ownership. Remember an oil company will not have to enter the land owner's surface to extract the Oil/Gas because of the fracking drill process. However, if the mineral rights are a joint ownership, then you both will (must be) offered leases based on ownership percentages of the mineral rights. I'm not aware of any more leasing or current well drilling in the section where your minerals are located.
has anybody had their lease renewed or lease option exercised lately? our 3 year lease with EnCana expires at the end of the month. the lease agreement includes a 2 year option. curious about weather or not they will exercise the 2 year option or let the lease expire. if they let it expire, and oil prices go back up, the lease cost per acre will be significantly more in the future. we know there is oil in the TMS...thx..Anthony
Well the month of February is coming to an end. It looks like EnCana is not going to exercise the 2 year option on our lease. any other news about SECTION 21 T2N R6E? thanks....Anthony
Jimmie, I do not own any mineral rights. I have only royalty rightsā¦. I have a Royalty Deed with, I guess, the present land/mineral owner. So, if the present mineral owner, say leases his/her entire acreage for say $250, 20% Royalty, what does that mean for me? Who is obligated to make sure I get my $$$$, when and if the black gold is frackedā¦. Ralph
p.s. I did see some impressive oil production occurring just south of T2N/R3Eā¦.by Enanca
Also, there have been four wells approved for drilling in Sec 30, T2N/R3E:
| Wellinfo | 2300520920 | ENCANA OIL & GAS (USA) INC. | Harvey 31H | 1 | OIL | PW | AMITE | Pearl River | 30 | 2 | N | 3 | E | 23005209201000 |
| Wellinfo | 2300520921 | ENCANA OIL & GAS (USA) INC. | Harvey 31H | 2 | OIL | PW | AMITE | Pearl River | 30 | 2 | N | 3 | E | 23005209211000 |
| Wellinfo | 2300520922 | ENCANA OIL & GAS (USA) INC. | Tumey 30H | 1 | OIL | PW | AMITE | Pearl River | 30 | 2 | N | 3 | E | 23005209221000 |
| Wellinfo | 2300520923 | ENCANA OIL & GAS (USA) INC. | Tumey 30H | 2 | OIL | PW |
I own 270 gross/2.8125 net mineral acres in Section 30 of 1N-5E, Amite Cty. Leased in 12/13. This is my only interest in MS.
I am interested in selling yet have not a clue as to market value. Any info would be greatly appreciated.
Ralph, just saw your February 24, 2015 posting about royalty. What % of royalty you own? By the way, the royalty payment will not come into play until Oil/Gas production is established. You're probably not entitle to any bonus payment for leasing of the mineral rights. Since you don't own any. You should consult an attorney about your % royalty ownership.
Scott, I was offered $1000.00 per net acre for my mineral rights about 2 years ago; they are located in Amite County. I have no interest in selling, so I didn't pursue the offer. It is my understanding that land owners are being offered as much as several thousands of dollars per acre now.
Jimmie, 10 royalty acres out of 49 @12.5%....I talked with the EnCana lawyer rep, he knew all about the approved drills in my area, but I did not get to the point to ask him (he had another phone call) if he had my name on the royalty list. not even sure of had gotten that far... He did say, if all is Kosher, I would get paid from the 20% that person collects to whom I have the royalty deed, something like that. I am not sure who that person is....the lawyer would know- I may call him back this week.
Ralph
But, he also said that these new wells would be delayed in time quite a bit, I guess this remains to be seen,,,
Does anyone know the timing on receiving a Division Order after production has started? I've seen 90-120 days to several months or even years. Is there a law that limits the timing in Mississippi?
From Doug Barron: I'd like to comment on "lease renewals." EnCana renewed their lease extension for the 2 year period, effective this coming July, 2015. Although our lease was executed in Dec. 2011 for 3 yrs., it was not to be effective until July 5, 2012. The renewal was contingent on getting an additional 3 years lease extension period after the current 2 year extension period expires, with the same renewal payment amount. I asked for a "bump," in the amount but they told me, "...with price per barrel as it's been and is currently, there's just no way to do that at this point." I wasn't surprised, the royalties we receive in Louisiana have fallen dramatically the last few months... but we are relieved (and elated) they wanted the additional period of time even at the same amount of $. They have 4 wells approved in our area, but I doubt they'll drill until the price stabilizes somewhat higher. Which I feel will happen in the next 2-3 years and they feel the same. Oil will come back with a vengeance, if history is any kind of a predictor and I believe it is. My cousin and I are greatly encouraged and would say to anyone in the same boat, don't sell your mineral rights, hang on to them... Amite county is still a "hot" area for future oil exploration and drilling.
Leasing information anyone - Is it true that the going current mineral rights leasing offer in the TMS play, in Amite County, is now $200 per acre with a 3/16th royalty? Thanks for any info feedback concerning this situation.
Ours was $250 with 1/5 royalty but that was a year ago.