My father and his two sisters recently found out that they have inherited mineral rights in Divide County ND... We have now found out that there is a well just put in august and it started producing oil in Feb. We are getting conflicting reports about what their options are...Some say since the well is already producing that we automatically fall into the non-consent role and others say that we have a choice of lease or non-consent and that it doesn't matter if it's already producing...Who is right? Any insight would be greatly appreciated, Thanks!
You have the capability to accept a lease if the operator offers one to you, it's your property, even if the well has operated for 20 years. The operator must offer you a reasonable lease or they can't impose the 50% risk penalty if you are force pooled. If they intend impose a risk penalty, the operator must offer you participation or they can not impose the 50% risk penalty. You will get a lease offer if the well is producing. If you refuse the lease, the operator will send you an authorization for expenditure, with estimates of cost and how much you would owe for your part of the well if you participate. You still have alot of options. I would do some study so I could maximize what I make from this, such as how much this well is producing, if it's alot, can I afford to participate, would someone like to buy my portion of this well, but not the total of all my mineral rights, before my time limit of 30 days acceptance of the authorization of expenditure runs out? Possibly you would like to be a carried interest [force pooled] in which you will recieve a 16% royalty and the other 84% goes to pay for your portion of the well and 50% penalty of actual drilling cost, which does not include operating cost or surface equipment? You have options. Be of good cheer, you are going to get money from this, the question is how much ?
Thank you so much for your response...Can you tell me exactly when that 30 days of acceptance of authorization of expenditure actually begins... We've only seen the report for Feb and there was just a handful of production days...But the Division man said last week that it was now producing 300 barrels per day, but he is also the same man that said we are automatically have to be in the non-consent role...sooo hmmm...?
r w kennedy said:
You have the capability to accept a lease if the operator offers one to you, it's your property, even if the well has operated for 20 years. The operator must offer you a reasonable lease or they can't impose the 50% risk penalty if you are force pooled. If they intend impose a risk penalty, the operator must offer you participation or they can not impose the 50% risk penalty. You will get a lease offer if the well is producing. If you refuse the lease, the operator will send you an authorization for expenditure, with estimates of cost and how much you would owe for your part of the well if you participate. You still have alot of options. I would do some study so I could maximize what I make from this, such as how much this well is producing, if it's alot, can I afford to participate, would someone like to buy my portion of this well, but not the total of all my mineral rights, before my time limit of 30 days acceptance of the authorization of expenditure runs out? Possibly you would like to be a carried interest [force pooled] in which you will recieve a 16% royalty and the other 84% goes to pay for your portion of the well and 50% penalty of actual drilling cost, which does not include operating cost or surface equipment? You have options. Be of good cheer, you are going to get money from this, the question is how much ?
The AFE authorization for (or field) expenditure is basically served on you and you have 30 days to elect to participate or not. They could send it with the lease offer but I think that would be unusual. The operator does not want to carry your interest in a comercially viable well. Carrying your interest would cap the amount of money they could make from your interest per well to 50% of the cost of drilling, when of course they hope to make much more than that. The march numbers should be out, they are for most of my wells. If you can give me the legal description or API # for the well I should be able to see march numbers for your well. I'd want to know how the well was producing before I made any major decisions. I'd be glad to help.
Sorry about the delay getting back to you...its Township 161 sect.30 range 96...I was told the numbers for March wouldn't be released until May 15th...Anything you could find out would be great, Thank you
r w kennedy said:
The AFE authorization for (or field) expenditure is basically served on you and you have 30 days to elect to participate or not. They could send it with the lease offer but I think that would be unusual. The operator does not want to carry your interest in a comercially viable well. Carrying your interest would cap the amount of money they could make from your interest per well to 50% of the cost of drilling, when of course they hope to make much more than that. The march numbers should be out, they are for most of my wells. If you can give me the legal description or API # for the well I should be able to see march numbers for your well. I'd want to know how the well was producing before I made any major decisions. I'd be glad to help.
Rms, the report for march is out, but it's all gas produced and sold. March is 0 days-0runs-0oil-0water 205 MCF gas produced and sold. February was 8 days 1612 barrels. There is obviously some things to work out with this well. In the wellfile they state that they tried something different. " At this point we departed normal CRI proceedure, as this rig had been tapped to try an experimental drilling proceedure." They weren't trying to invent a more expensive well in this experiment. They did use what I have come to recognize as a good sand mix in the frack, no skimping there, but only 11 frack stages and some other changes one of which was to stop 752 feet short of planned depth on the lateral. This well has problems. I believe that they will work them out to a greater or lesser extent and if lesser, you will probably get another well eventually. There is oil there and they are not going to leave it. I would want and settle for the best lease agreement that anyone else made. I have a friend who doesn't like a "most favored nation clause" in leases but I think this is the place for one. I wouldn't want to be a carried interest on this one and help pay for their science project. And no, before anyone asks, I don't think the NDIC could help in this situation, we mineral owners are basically at the mercy of the operator that obtains the greatest portion of the spacing. I suppose there is some small chance they you will not receive a lease offer. Unless the average weighted lease royalty in the spacing is less than 16% you would receive 16% as unleased and they can not impose the 50% cost of drilling risk penalty if they do not offer you a reasonable lease. As above I would append the most favored nations clause to any lease they send so you get the best lease terms that anyone else got. There will probably be some squawking but in the end if they are paying the same to someone else, it's reasonable for you to get the same. Wish I had something better to tell you.
Hi R W,
Sorry to jump into the discussion so late but I just joined MRF.
Regarding non-consent issues there is a recurring problem that we are experiencing. We have chosen to go non-consent in several wells that are now producing in Dunn County. Of issue is getting the Operators to actually disclose revenue vs expense costs needed to calculate the point when the well would pay out plus the 50% penalty. Without this information we are in effect being kept in the dark as to the Operator's ROI as it relates to our Back-In.
Have you, or others, experienced this problem of an Operator not supplying information? Given our small positions in some of these wells it makes no sense to Audit the company.
Anyone, have any ideas about what can be done to get financial information from the companies.?
Thanks,
peter
r w kennedy said:
You have the capability to accept a lease if the operator offers one to you, it's your property, even if the well has operated for 20 years. The operator must offer you a reasonable lease or they can't impose the 50% risk penalty if you are force pooled. If they intend impose a risk penalty, the operator must offer you participation or they can not impose the 50% risk penalty. You will get a lease offer if the well is producing. If you refuse the lease, the operator will send you an authorization for expenditure, with estimates of cost and how much you would owe for your part of the well if you participate. You still have alot of options. I would do some study so I could maximize what I make from this, such as how much this well is producing, if it's alot, can I afford to participate, would someone like to buy my portion of this well, but not the total of all my mineral rights, before my time limit of 30 days acceptance of the authorization of expenditure runs out? Possibly you would like to be a carried interest [force pooled] in which you will recieve a 16% royalty and the other 84% goes to pay for your portion of the well and 50% penalty of actual drilling cost, which does not include operating cost or surface equipment? You have options. Be of good cheer, you are going to get money from this, the question is how much ?
Hi Peter and welcome. My operator gives me the numbers, of course I know there is a problem with them. I and my brother will audit the operator. We have a family member who is a forensic accountant, but we would have audited the operator anyway. If you can't swing the audit yourself because your interest is too small, you might be able to find other interests in the well besides yourselves to participate in the audit, you may see the names of the others on your AFE. I know it's good to know, but I would let the operator go for about 4 years before auditing because you want there to be enough to find to make it worthwhile. Welcome to the forum. I and my brother have wells in Dunn county also. I will send you a friend request in case you don't want to disclose anything but I don't think there is anything to worry about, it's not like the operator doesn't know all about your interest.
Peter Shapiro said:
Hi R W,
Sorry to jump into the discussion so late but I just joined MRF.
Regarding non-consent issues there is a recurring problem that we are experiencing. We have chosen to go non-consent in several wells that are now producing in Dunn County. Of issue is getting the Operators to actually disclose revenue vs expense costs needed to calculate the point when the well would pay out plus the 50% penalty. Without this information we are in effect being kept in the dark as to the Operator's ROI as it relates to our Back-In.
Have you, or others, experienced this problem of an Operator not supplying information? Given our small positions in some of these wells it makes no sense to Audit the company.
Anyone, have any ideas about what can be done to get financial information from the companies.?
Thanks,
peter
RW,
What AFE? We requested one but never received it once we went non-consent. It truly believe that the larger operators are moving so fast that they not following all the rules. For instance- are you being charged for transportation and compression on any of your non-consent royalty checks? We are, even though the law says no to operation charges.
They know the chances of the mineral owner launching a lawsuit is very small. We should put together a class-action law suit which I believe would get their attention.
.
Times like this wish we had an oil and gas lawyer in the family.
Peter
ps- nice to meet you too.
r w kennedy said:
Hi Peter and welcome. My operator gives me the numbers, of course I know there is a problem with them. I and my brother will audit the operator. We have a family member who is a forensic accountant, but we would have audited the operator anyway. If you can't swing the audit yourself because your interest is too small, you might be able to find other interests in the well besides yourselves to participate in the audit, you may see the names of the others on your AFE. I know it's good to know, but I would let the operator go for about 4 years before auditing because you want there to be enough to find to make it worthwhile. Welcome to the forum. I and my brother have wells in Dunn county also. I will send you a friend request in case you don't want to disclose anything but I don't think there is anything to worry about, it's not like the operator doesn't know all about your interest.
Peter Shapiro said:Hi R W,
Sorry to jump into the discussion so late but I just joined MRF.
Regarding non-consent issues there is a recurring problem that we are experiencing. We have chosen to go non-consent in several wells that are now producing in Dunn County. Of issue is getting the Operators to actually disclose revenue vs expense costs needed to calculate the point when the well would pay out plus the 50% penalty. Without this information we are in effect being kept in the dark as to the Operator's ROI as it relates to our Back-In.
Have you, or others, experienced this problem of an Operator not supplying information? Given our small positions in some of these wells it makes no sense to Audit the company.
Anyone, have any ideas about what can be done to get financial information from the companies.?
Thanks,
peter
Peter, they should have sent you the AFE, literally served it on you by mail. I suppose you could have short circuited that by telling them you were non-consent. Keep track of the post production costs because you actually may be able to sue.....in small claims court.
I sent you a friend request so we could private message because I think you would have named the operator if you felt comfortable doing so. Look at the top right of the page where it says friends. My operator in Dunn county is Kodiak and I have something of an in with them. Burlington sends me quarterly statements. I have friends who get statements from Petro Hunt, I'm curious who your operator is. Some operators are so hopelessly fouled up that they might not be able to make a statement.
Rw,
Woops, actually did get the AFE, an occassional JIB , and a Division Order with just our name on it- Seems the Operator doesn't want us to know who else is in the well.
I'm actually off for the Dakotas and Minnesota for the week and will privately chat you when I get back.
If you would accept my friend request we could do it here through private messages. My e-mail boxes get pretty full and I'm sure I see messages here more quickly. I suggest you delete your e-mail.
Peter Shapiro said:
RW,
I'm back- When you get a chance drop me a line at . We can talk about operators, operations, and leasing.
peter