Cuz,
I too would want test well data before investing those dollars. Yet, for new and smaller companies the way the game works is just like Shale Exp. (and the others) appear to be playing it out.
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Get on the edge of a play before Big Dogs show up.
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Lease as much acreage as possible.
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Secure leases for long terms.
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Buy leases as cheap as possible since your ‘early’.
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Then sell that Lease Block for a profit & keep an override, or…
5b. Sell half as Joint Venture to deep pockets to recover all your cost.
What I’ve described happens all the time. There is nothing wrong with it. The companies doing this risk vast amounts of money in the hope of making much more. In addition to upfront bonus money, they spend vast amounts of time and energy to block up hundreds of individual leases. So a purchaser will pay a premium to acquire a large block such as 150,000 net acres in one fell swoop.
Also, from the mineral owners perspective it’s not all bad. Drilling and development is far more likely if Shale can sell Conoco, XTO, or Continental Resources a 150,000 acre block. Yes, they may have paid you $150 and later sold it for $650. Yet if nobody else was offering even $100 did it harm you? Some may think so but I don’t see it that way.
Shale Exp. is throwing millions of dollars at a “pie in the sky”. I suspect it is because they’re confident they’ll be able to find a hungry buyer for that pie. Maybe I’m wrong and they’re sitting on the seismic ready to drill. Yet the above scenario remains the most likely one. We (mineral owners) just need to strike the best deal we can, then sit back and see where it goes.
Billy Bob Jim Bob,
I’m not yet convinced thar’s oil in them thar hills. However, Shale may know something we don’t. Also, I think it’s highly likely that Shale Exp. (and all the other small companies) are blocking up large tracts of leased lands to sell to stronger hands for possible exploration.
Tim, to clarify… I agree there is oil in Daniels County. There has been in the past, and more will be found. I’m just not yet convince of the scope of the potential new development. Some new fields are probable, while county-wide production (ala ND) remains a very big question mark.
Sign me Billy Bob Jim Bob’s Long Lost Cousin,
Jim Bob Doubting Thomas Billy Bo Bob
Dennis, I agree with much of what you posted; Leases with shortest term possible are better than longer terms, and it’s almost never best to take the first offer, and yes include Pugh Clauses or separate leases. Finally 1/8th royalty is too low anywhere.
None the less, while Daniels County is getting attention today it is on the western fringe of the Bakken play. As a result, I don’t know if you can find anyone willing to lease you for less than a five year term. Also, Daniels County may not ever develop much oil production, so sometimes the oil companies (or their landmen) don’t return with other offers.
Therefore sitting on your hands for a few years may cost you the ability to lease at all. Whether to lease today or not is always a crap shoot. Until more wells are drilled in the county, and major production found, it is an open question if leasing activity will continue here or not.
I am sure when a company does a test well, the word would get out real quick if it was good or bad, so, if it was good and you didn’t have the land leased the price would go sky-hi… or you could do like the pharohs did with the builders of the tombs…
Cool. Thanks for taking the time to post that. From all of my reading there are 3 formations in that area. Drill baby drill. I for one am gonna roll the dice.
What Eastern MT says about small companies/flippers getting in early on the edge of a play makes sense and is the way it has played out repeatedly. I think it’s better to wait a couple years to see what happens, the closer you get to actual drilling the better my crystal ball works. What are the actual odds that you will be drilled in the next year anyway ? The value of your minerals could rise significantly in a year while I see the odds of significant drilling in the next year to be small. It is early after all.
Billy Bob Jim Bob,
I sincerely hope all three of those formations are saturated in oil. I’d like that! Though as Mr. Kennedy stated, I too have a hunch we’re two or three years away (at least) from Daniels County seeing real drilling activity.
P.S. Besides the names, I can tell we’re cousins by your photo.
I too have large ears!
I have been told that $150 p/acre is not nearly enough and not to accept it. This from someone who has wells in North Dakota.
Sharlie, it is hard to know when an offer “is enough”. $1,500 is not nearly enough in the midst of some of the ND production. Though in areas which are yet to be proven $50 may be enough, or at least as much as the market will bear. At present I see circumstances in Daniels County as much closer to the later than the former.
There is potential for the county but it is almost completely unproven. Though that situation will change as drilling is done. A handful of successful wells in Daniels would dramatically increase the offers. Yet a handful of dry holes could make all the offers go away. Wish I had a fool proof formula to share. All I can suggest is listen to the advice of those you trust then follow your instincts.
Don’t lease now if it does not feel right. Though in general remember, more often than not, those who hold out for the very last dollar are often left disappointed. Wish you all the best with your decision.
Tim:
Thanks again for sharing the info you have in an unbiased fashion.
Fractional holdings is the most common way to disperse holdings, but when you say ( My mother gave her 1/6th to us three girls, share and share alike.) does that mean you all have one interest in the 1/6th your mother had ?
Frank May WAS their landman now it is a person named Nicole. The issues were about Shale claiming a confidentiality agreement with Montana Lease Holdings was violated, apparantly MLH staff use to work for Shale, they then left Shale and started another company using info they obtained while working for Shale. I do not know what the facts are, I just know this is what the court documents say.
Tim thanks for the word.
If they’re fighting over the right to lease in Daniels County, all I can say is “It’s nice to be loved”.
Chuckie, I hadn’t heard of this suit before. Yet if this is the gist of the fight, in my opinion, if anything this might impair MLH’s ability to execute leases.
Several members in my family group have leased to MLH and have been paid in the last 3 weeks. I think the 2 companies will have to fight this issue out in court and I expect to us it won’t make any difference in the end.
My mother was one of 6 children. Her parents left each of their children 1/6th interest.
My mother gave her 1/6th to us three girls, share and share alike.
I just got a card from Shale and they are now offering $325 per acre, Frank May is no longer with them, A nice young lady named Nicole is the new rep. in Scobey and they are in a law suit with MLH.
Tim, who is “MLH” and can you provide info on what their suit involves? Also, was Frank May their landman or someone else? Thanks.
Hello Sharlie: It would all depend if in your mothers will she DIVIDED all her holdings, or FRACTIONED all her holdings./ if the minerals were fractioned then all people involved would get a fraction of the origional minerals.Say for example if there were 6 people (sisters and cousins) then all would get 1/6th of the origional mineral right. Hopefully it was done this way so all of your minerals would be independently owned by you, and they would independently own their fractional shares. If they were all inherited as one unit then the nightmare ensues. Your (court) probate procedure should notify all mineral holdings and supply with death certificate(s) and new owners names ect. Hope this helps a little…
Tim:
I assume MLH is Montana Land Holdings ?? Do you know what the issues of the lawsuit are, and whether the legal action affects Shale’s ability to enter into new leases? Thank you for sharing info !!!