Dunn County ND Mineral Rights Lease Offer

General Mineral Rights Discussion
1

I was just sent by Sinclair an Oil & Gas lease offer T146N, R-97W, Section 19 Dunn County ND and need some advice from the wonderful people on this forum.

I inherited this years ago and found out last year that a producing oil well (Porcupine 1-19H) Little Knife was on this site for over 3 years. I contacted Sinclair and provided proof that I owned it and they were nice enough to send me the back royalties even though the will was not probated in North Dakota at that time. Since then the will was probated the end of last year in ND and I provided Sinclair with copies of the ND Probate and Deed update.

I did not have a lease with Sinclair so I was getting paid a non_consent 16% royalty is my guess. Now they just sent me this lease to sign. I own Gross Acres: 648.80 Net Acres: 4.9984 (NMA). The terms of the offer are 3 Years (HBP), Bonus Consideration $500/Acre x NMA $2499.25, Royalty Interest: 3/16ths = 18.75%

QUESTIONS:

1- Why is Sinclair sending me a 3 year Lease and Bonus Offer at this time if their is a producing oil well that I am being paid on (16% non-consent)? This is the second time this year that they are sending me this lease. I just found out on my own that they have permits to drill 2 more wells on my mineral rights (They have not started the drilling as of yet).

Should I sign the lease? I was advised in the past not to sign but I do not understand what the harm is in signing it. Most people here have signed leases I think. I need advise on what to do or not to do?

2- Is 18.75% royalty and $500/Acre Bonus the going rates?

I would think 20% Royalty and a much higher bonus on a producing well?

Point of Information:

My understanding is that this first well was drilled as a test well and their may be future plans to put more wells on the site. Their are issues on selling the gas produced from the well.

I posted this in the Dunn County ND site with very little feedback.

Thanks Bruce

2

Bruce, I would look at it this way, if they didn't see a potential to make even more money than they already would have, they wouldn't be offering you a lease at this late date. I have looked at your wells production before but I don't recall the exact figures but it was no monster. On the other hand, 18.75% is greater than 16% but I would make darned sure that the lease and the 18.75% royalty was effective from first production. I personally would not sign the lease unless I thought the difference in royalty was significant. There may be clauses in the lease that actually cost you money. Until they made you the lease offer and 30 days passed without your agreement or notifying them that you would not lease you had a window of time in which you could still lease to anyone.

3

RW,

Good to see you are back....

Clint Liles

4

Your well was spud 10/2010. Eventually this will be a core or sweet spot area. The future wells will be better with improved technology (but maybe lower prices). Yes, get leased. For the long haul. But have the lease looked at by an expert (as r w kennedy stated.) In 10 years, refracs will be a thing. Lots of oil here, stacked. You should get at least $1k per acre, up to $1.5k. This operator might not have deep cash reserves, however. I'm not familiar with them. 2 new APD's or horizontal wells permitted in your Section 19.

I found that I was non-consent on a well due to bad address they gave as a reason. Conoco was good enough to lease me on good terms and reimburse me back to day one. 20% is the going rate on royalty. But 18.75 is close enough in my opinion.