Doing research

I’ve read a lot of “new to the game” posts and amazingly, they all seem to be different; here’s my post.

I have mineral rights on 167 acres of land west of Encinal, TX in Webb county. I’ve recently been approached by Escondido Resources LLC for a 3/2 @ $1250/acre and a 25% royalty at all depths.

Questions: Is this a good deal? Does anyone have experience with this company? What should I watch out for, red flags and general watching out for my security? How are payouts conducted? When does the “bonus” come in as well as royalties? Any examples out there of royalty payout amounts and frequency?

This forum is an amazing resource and I’ll be loging my progress as things get going. We have not signed anything as of yet.

Thanks Nathan

Nathan, Sounds like Escondido Resources LLC are busy:

21, 2012 7:10am EST

Escondido Resources II Releases Results of Horizontal Drilling in South Texas

Escondido Resources II, LLC today announced the results of the company’s 2011 horizontal drilling program in South Texas. Escondido drilled 17 wells in 2011, with 100 percent success and an average initial production (IP) rate per well of nearly seven million cubic feet (MMcf/d) of high Btu natural gas per day. Escondido currently has two drilling rigs active in Webb, LaSalle and McMullen counties. Current production capacity is approximately 65 MMcf/d, with four new wells scheduled for fracture stimulation in March and April. Production from the new wells is expected to boost Escondido’s total production to nearly 90 MMcf/d.

Escondido drilled its first horizontal well in 2009 in Webb County. In just two years the company has drilled 29 more horizontal wells in the three counties – 18 in the upper Cretaceous Escondido formation, seven in the Olmos sandstone formation and five in the Eagle Ford shale formation. Escondido Resources has a substantial acreage position in the region which includes approximately 60,000 net acres in the shallow Escondido and Olmos formations, primarily in northern Webb County. The company also owns the rights to the deeper Eagle Ford shale formation in more than half of this acreage.

“Last year’s drilling program was focused on our ‘bread and butter’ Escondido and Olmos reservoirs, which are very economic and highly profitable for us, even in today’s low gas price environment,” said William E. Deupree, president and CEO of Escondido Resources II. “We also drilled an Eagle Ford shale well in northern Webb County that IP’d at 10 MMcf/d of rich gas and a second Eagle Ford well in northern Webb County that had extremely impressive log shows and will be fracture stimulated in March of this year. Escondido’s acreage position was strategically assembled to allow us to pursue multiple drilling objectives in the Escondido, Olmos and Eagle Ford shale. The results we’re achieving as we continue to drill horizontal wells in all of these reservoirs have continued to exceed our expectations.”

Meritage Midstream Services gathers rich gas for Escondido Resources through the Cuervo Creek Gathering System. The newly constructed rich gas pipeline provides multiple interconnects and numerous options for delivering liquids-rich natural gas to various regional processing markets. With more than 85 miles of 16-inch pipeline, the system has an initial capacity of 200 MMcf/d and is expected to expand alongside increased demand for gathering rich gas from shallow formations including the Escondido and Olmos.

“Pipeline capacity has been a formidable obstacle for producers working in deep and shallow horizons in South Texas,” said Deupree. “As our drilling program continues to expand it’s very important for Escondido Resources to have a midstream partner that’s willing to work with us to provide rapid access to multiple markets. Our relationship with Meritage Midstream plays a big role in our success.”

About Escondido Resources II, LLC

With headquarters in Midland, Texas, and satellite offices in Houston, San Antonio and Kingwood, Texas, privately-held Escondido Resources II, LLC is focused on the development of conventional and unconventional reserves in South Texas. Escondido II is engaged in development of acreage in Webb, LaSalle and McMullen counties in the Eagle Ford Shale and the Olmos and Escondido formations. Partners William E. Deupree, Mark E. Semmelbeck, J. Kurt von Plonski and J. David Wrather formed Escondido Resources II LLC as the successor to Escondido Resources, L.P., which was sold for $249.5 million in October 2007. Escondido II is backed by private equity commitments from EnCap Investments L.P. of Houston.

Clint Liles

Nathan,

Go to top of the Mineral Rights Forum page. Go to the 'Groups'. Click on "County Groups" and scroll down to Webb County, Texas Group. Then join that group and communicate with the group members and maybe you can get answers to some of your questions. Good luck.

Clint Liles

Thanks for the info!

So what’s the process for receiving funds? Frequency?

Clint Liles said:

Nathan, Sounds like Escondido Resources LLC are busy:

21, 2012 7:10am EST

Escondido Resources II Releases Results of Horizontal Drilling in South Texas

Escondido Resources II, LLC today announced the results of the company’s 2011 horizontal drilling program in South Texas. Escondido drilled 17 wells in 2011, with 100 percent success and an average initial production (IP) rate per well of nearly seven million cubic feet (MMcf/d) of high Btu natural gas per day. Escondido currently has two drilling rigs active in Webb, LaSalle and McMullen counties. Current production capacity is approximately 65 MMcf/d, with four new wells scheduled for fracture stimulation in March and April. Production from the new wells is expected to boost Escondido’s total production to nearly 90 MMcf/d.

Escondido drilled its first horizontal well in 2009 in Webb County. In just two years the company has drilled 29 more horizontal wells in the three counties – 18 in the upper Cretaceous Escondido formation, seven in the Olmos sandstone formation and five in the Eagle Ford shale formation. Escondido Resources has a substantial acreage position in the region which includes approximately 60,000 net acres in the shallow Escondido and Olmos formations, primarily in northern Webb County. The company also owns the rights to the deeper Eagle Ford shale formation in more than half of this acreage.

“Last year’s drilling program was focused on our ‘bread and butter’ Escondido and Olmos reservoirs, which are very economic and highly profitable for us, even in today’s low gas price environment,” said William E. Deupree, president and CEO of Escondido Resources II. “We also drilled an Eagle Ford shale well in northern Webb County that IP’d at 10 MMcf/d of rich gas and a second Eagle Ford well in northern Webb County that had extremely impressive log shows and will be fracture stimulated in March of this year. Escondido’s acreage position was strategically assembled to allow us to pursue multiple drilling objectives in the Escondido, Olmos and Eagle Ford shale. The results we’re achieving as we continue to drill horizontal wells in all of these reservoirs have continued to exceed our expectations.”

Meritage Midstream Services gathers rich gas for Escondido Resources through the Cuervo Creek Gathering System. The newly constructed rich gas pipeline provides multiple interconnects and numerous options for delivering liquids-rich natural gas to various regional processing markets. With more than 85 miles of 16-inch pipeline, the system has an initial capacity of 200 MMcf/d and is expected to expand alongside increased demand for gathering rich gas from shallow formations including the Escondido and Olmos.

“Pipeline capacity has been a formidable obstacle for producers working in deep and shallow horizons in South Texas,” said Deupree. “As our drilling program continues to expand it’s very important for Escondido Resources to have a midstream partner that’s willing to work with us to provide rapid access to multiple markets. Our relationship with Meritage Midstream plays a big role in our success.”

About Escondido Resources II, LLC

With headquarters in Midland, Texas, and satellite offices in Houston, San Antonio and Kingwood, Texas, privately-held Escondido Resources II, LLC is focused on the development of conventional and unconventional reserves in South Texas. Escondido II is engaged in development of acreage in Webb, LaSalle and McMullen counties in the Eagle Ford Shale and the Olmos and Escondido formations. Partners William E. Deupree, Mark E. Semmelbeck, J. Kurt von Plonski and J. David Wrather formed Escondido Resources II LLC as the successor to Escondido Resources, L.P., which was sold for $249.5 million in October 2007. Escondido II is backed by private equity commitments from EnCap Investments L.P. of Houston.

Clint Liles

Nathan -

Bonus payments are paid when the lease is signed and/or title cleared. It is a one time payment and in recent years included annual rent payments.

Royalty payments are paid out of production and are paid on a monthly basis. You should receive your first check within 90 days of any well coming on line or turned to the tanks (first sales).

Do you own your surface? If so, what do you do with the land? There are issues you may want to address in your lease regarding use of the surface: Placement and construction of roads, drill site pads, drainage, fencing, cattleguards, all sorts of things. WATER WELLS and WATER USAGE are extremely important issue to ranchers and farmers in Webb County.

All such issues must be addressed in your lease.

The 3/2 Term and 1/4 Royalty proposed are typical in the region and perfectly acceptable. As for the per acre Bonus amount of $1,250.00 an acre, I would have to check around and get back to you.

Can you post a legal description for your land?

Hope this helps -

Charles Emery Tooke III

Certified Professional Landman

Fort Worth, Texas

Charles,

Thanks for the help on answers I wasn't sure of.

Clint Liles

Thanks

We own 100% sub surface.

So you own 100% of the mineral rights, but no surface rights? If you will tell the the survey name and/or abstract number I can send you what is going on in your area - leases, permits, etc. If it is immediately west of Encinal and just over the line into Webb County, I can tell you that leasing in the area has only recently begin and that there have only been a handful of Eagle Ford Shale wells completed in the general area so far. And that they have all been Dry Gas wells, which aren't particularly interesting to most companies these days. Oil is over $100 per barrel, Gas is barely over $2 per MCF...