I had for less then a year, the company ended up revoking it. When I called and asked why they gave a few reasons, one the well next to ours was dry, and the oil prices are low and thirdly its on indian land and they did not want to pay the BIA every year to hold the lease. They said maybe someone else will want to lease it. What are the odds of that ??
Completely different!
Anyone considering doing such a venture had better have a really good oil & gas accountant, a good oil & gas attorney and a very educated concept of the risks (very high) and potential returns (possible). A good working knowledge of the oil industry and finance is critical. This is not for the faint of heart or for amateurs. Please educate yourself completely before diving into something like this. There are plenty of scammers out there and also good companies, too. Get informed. Be sure you have the money to lose.
So if someone buys into a venture isent that different than directly buying the land? Either the venture goes forward and flows oil and everyone makes money, they drill all dry holes and everyone looses or they give your money back?
Ron, if only it were that simple. If you are attempting to buy in somewhere, there is no promise that it will ever be drilled. They will always go for the low hanging fruit where they know almost certainly they will find oil because they do studies. Owning land doesn’t provide you anything unless you also own the mineral rights. In my case, the land actually belongs to someone else but we have the mineral rights. If you are trying to buy in somewhere, it will be very high stakes that you ever get anything from it. There are pages and pages of studies that has to be done if they drill and every I has to be dotted and T’s crossed. I wouldn’t even bother if mine wasn’t handed down in the family already. This is not a get rich quick scheme.
I hate to rain on the parade of these potential investors but, you have to plan to lose it all, especially now, and then add more money as time goes on depending on your investment agreements. Unless you have several million to lose, don’t do it, period. The market right now is crazy and no end in sight. Do your do diligence as suggested earlier with accountants and attorneys you can trust, let me know when you can find them.
M Barnes, Thank you for your response. I appreciate your help. Tom
Tom, yes it is a roundabout way of extending the lease. Usually a unit is done after discovery and then several operators go together to pick a main operator. You do not have to sign it. Or if you want to negotiate, get more money for the extra two years up front. Read up on the rules for units in Montana.
Looking for a little direction. My mother signed a 3 yr lease with Fort Worth in Jan of this yr for some acres in Roosevelt Cnty MT. We received a “Ratification and Joinder of unit agreement” for the proposed “Stone Turtle Unit”. Online I found a document that states “As currently contemplated, formation of the unit would establish a 5 year primary term on all leaseholds in the unit, in exchange for drilling activity”. Is this just a sneaky way of extending all the leases without renegotiating? Thanks in advance for your thought. Tom
So maybe it was a good thing my lease was revoked ??
Jordan:
Be very cautious in negotiating a new lease since the market is down and it is unlikely that you will be able to strike a lease which favors the interests of the mineral owner (yourself). Most likely, the lessor will attempt to lowball you on the bonus and negotiate for a long term lease (5 yrs.). I would be very careful and possibly consult with someone before signing on the dotted line. At lease when the market begins to recover (whenever that time is), you will be able to negotiate a lease which will be more favorable on your behalf. Good luck!!
Jordan:
my land was Native American Land also. We had a lease supposedly for 5 years but it was revoked after a year. So things don’t look good.
Our lease for W2, Sect17, 158N, 97 W with Continental will expire in September. What expectations should we have about a renewal with Continental or that another company will want to lease. What kind of terms might we get?
William,
Given the current pricing situation and the state of the industry, I think the chances of leasing might be pretty low for a while. Also, the nearest wells to you did not have particularly great returns.
Also, be cautious of lowball offers to buy. Now is not a good time to sell.
I agree with M Barnes. Current prices/state of industry = sit back and wait. Don’t be fooled by early lessees when the market begins to recover. Lots will be out to get a bargin.
From what I hear, the cost to drill and complete a well in North Dakota has plummeted by 30% and possibly more. I knew the operators were on a spending spree, overpaying everyone but the lessor/mineral owners. The fact that operators have slowed down has in my opinion some upsides. While operators were rushing to get all the acres that were immediately economically feasible HBP, they drilled a lot of inferior wells that I am convinced will leave a lot of what would have been economically recoverable oil in the ground which is bad for everyone. Now operators can take their time and while they might have to still pay whatever the market will bear to drill and complete wells, what the market will bear is a lot less.
What is this going to mean? I believe it will mean that development will be ramping up again when oil is in the vicinity of $70 per barrel. It will not take $100 oil to get started again. Operators will not be in the whatever it takes, pay any price for oilfield services frenzy that had a grip on them last year.
At lower profit margins, operators are going to be drilling the best wells they can and not just the fastest cookie cutter wells that will get acres HBP. I have some more recent permits for wells on some of my acreage that has not seen any action since they were HBP with single poor wells in 2008-2009. It wasn’t the area that made the wells poor, the 5 of them are 10 stage sand fracks and they are surrounded by good wells on all sides, wells that have produced in the first 18 months as much oil as my wells produced in 5 years. Think about it. Those high producing wells probably cost 9-10 million dollars but they wouldn’t have cost that much if the oil companies hadn’t been willing to pay whatever it took to get those acres HBP in the “conquest” of North Dakota.
Some people in the oil business have been spouting for some time that shale will not be economic and can’t be sustained due to the cost of the wells and their rapid decline. If you drop the price of the well by 30%, you will see that it is a whole new ballgame. I believe they are also going to get better production from the wells because they are going to be doing a better job and leaving less oil and profit in the ground. Shale is not dead, it has just completed a marathon and it’s taking a rest. Shale is going to come back in leaner operations than it was before.
HBP = held by production. You may see the abbreviation a lot more in future.
Novice here, what does HBP means? Thank you.
Thank you sir.
My question is if the lease has run out and they do not renew shouldn’t there be some type of release from lease paperwork filed.
It seems that not filing a notice would act as a tacit hold on the property since it would need to be researched further by any new interested party to find out it was out of contract.