Just received a lease offer from Petro-Hunt for 1,960 gross acres / 51 net mineral acres in Wibaux county. Offer is $30 per net mineral acre and royalty of 1/8 of such production. Lease term is 5-years. If this a fair offer? Haven’t seen many other lease posts for Wibaux county.
Howard, I would say that offer simply serves to tie up a mineral owner for very little money. You would get $1,530 and then your stuck sitting for 5 years. the 1/8 royalty in general, isn’t anything to jump at. If you need $1,530 then the offer takes on a different perspective. The reason you haven’t heard of much (I am not from there nor have minerals there) is because this is the quiet/secret leasing time where they are working to lock up as much land as possible for the least amount possible. They have met others, but everyone keeps quiet (mineral owners that is) because they don’t realize they should be sharing with neighbors. So start talking with neighbors. I’d say wait if you are not in a hurry. Who is Petro-Hunt? a landman firm, flipper/investor, producer??? Be sure to understand the history of who you are signing with. Good luck.
Howard, you are getting it from all sides! Eastern MT is right about Petro Hunt being a driller but I bet they wouldn’t turn their nose up at an opportunity to flip your acres for 10 times as much in a couple of years. I also believe that $ 1530 is not enough money to enter into a contract for. Before I entered into a contract I would want legal advice and that might npt leave much after, also if you need $1530 the contract will not protect you, because you couldn’t afford to enforce the contract if the operator doesn’t do what they have agreed to do. 1/8th may not leave alot after taxes unless you have a monster well. Looking at the up and downside, downside missing out on $1530 [less legal expenses I hope] vs upside of possibly 2.5 to 10 times as much bonus and greater royalty in 2 to 3 years. I would be looking to maximize the upside. Good luck with your decision.
I would guess that the lease is still good…based upon our experience. My mother-in-law signed a three year lease with a two year extension option and then she died after two years. The lease was still good and we inherited this lease…and then signed an extension lease one year later which, as mentioned, was part of the original lease. As I understand it, death does not negate the lease…the lease was transferred into her estate and then we dealt with that lease as the administrators of the estate. Good luck.
That is correct. They originally only paid for 1/2 of the net mineral acres. Although they still need to make good on the bonus payment, it sounds like I’m still locked into the existing lease for a few more years although my mother recently passed away. Hopefully a sweeter offer will come along in a few more years once this lease expires.
Does anyone know what a good rate is for the 5 year extended option (per acre) for Daniels County? (Shale Exploration)
Sandra, avoid adding any extension option to a lease. Negotiate a flat term, preferably 3 years, or 5 years max.
Howard, a lease always does continue in force after the Lessor’s death.
Thank you all for the valuable input. My mother originally signed a lease with Petro-Hunt last August for the same terms; however, she passed away in January. Petro-Hunt apparently didn’t compensate her for all the interest she owned per the mineral deed. They contacted me to re-sign the lease. I will definitly sit tight until more activity occurs within Wibaux County. I know there is significant production activity within the counties surrounding Wibaux, such as Fallon, Richland, etc. I’m not sure if the lease Petro had with my mother is still good since my mother died.
I think what Howard was saying was that Petro never made good on the bonus payment (bank draft most likely)…if that was the case…then I wouldn’t even consider giving them a 2nd bite at the apple.
Maybe the word should be “HOPE”???
I have read about including a lease clause that states something like "if the bonus is not paid in “X” amount of time, the lease is null & void. Howards experience seems to support this idea.
Sandra:
A five year extended lease option is too long as two to three years should be the max in my opinion but I’m not fond of extensions In regards to the rates, looking back at the Montana State Auctions, in Sept. 2011, bonuses went from $105 in T34N;R 47E area to $76 in T37N;R 43E. This area will should see increased activity over the next few years but leasing at this time will small rates.
Sandra:
Again, Eastern MT and myself agree that the terms of this negotiation is unfavorable to you in regards to reaping the most benefits from these mineral rights but you know your own current situation and these are your minerals so you make the decision that is most favorable to you and your family. Good luck and hope your “rollin in the dough” in the next few years.
Howard:
I’m sure that the activity in this area will increase over time but keep in mind that Richland, Roosevelt and Sheridan counties are just now seeing the beginning of the MT boom. This will reach the adjoining areas eventually, especially as the operators drill expiring leases in order to HBP.
Just got a 5 year lease offer from HERCO at $100 per acre and 14% for Wibaux county. It’s a paid up lease. Does that seem reasonable to you all?
I would agree that this is definitely on the low end. In terms of activity, go to the Montana Board of Oil and Gas site…to the online data…and check out how much development has happened in your area to date. The map will show (when you highlight and zoom in) wells that are in the area. This will show you activity!! This being said, it appears to me on the very low end…as Charles mentions…this is 4-6 year old rates!! Good luck…
Hopefully more lease offers and drilling activity will start to occur within Wibaux county. Lots of activity in the counties surrounding Wibaux.
Sandy in WIbaux county leases are as high as 2,850 an acre with 25 percent royalties. Most that I have talked to dont want to extend beyond a 3 year lease do to it binding their hands
Rod:
DEFINITELY hold out. 3 year leases with 18.75% royalty are pretty much the standard these days, and $100 an acre is laughable for ANYWHERE in the Bakken.
Rod:
I’m not familiar with the Wilbaux County area except from the articles I read. I believe that GMX Resources leased acreages in this area in the past in regards to possible developement. I will guess that to date, very little drilling has occurred in this county as the emphasis has been concentrated on Richland county. My guess is over time that the area will be tested for developement. Having said this, the $100/acre is on the low side as this was what leases were bringing back in 2008. I would limit the lease term to no more than 3 years and attempt to negotiate a higher royalty. In the next couple of years, if developement starts to occur, all will go up in value. I would take my time and market your minerals by learning what other companies are leasing in the area. Make sure you lease to a company that is serious about developing the area.