Golden Valley County, ND - Oil & Gas Discussion archives

There are some very knowledgeable people on this site. I am wondering if any of you have an idea why drilling activity is almost non-existent in a large part of 142N/104W when there are producing wells within a couple of miles to the west and south. I am at the bottom of 142/104 and top of 141/104 and have a lease expiration next summer.

Let your lease expire, and then do NOT relist. Do a working interest instead. Did you ever wonder if you get 20% who gets the other
80% ? Generally the landmen and the oil company get most of your money from your share of the well. But you do have another option that they do not want you to know about and that is a working interest in the well. Do some research about this option and you will be thankful the old lease expired.
If you do not lease then you get the 100% of your share of production after expenses which will be deducted from your first check. You do not have to borrow your cost to drill they front you the money and take the cost out of the first check and you get 100%
from then on not 20%.
The reason the drilling in your area has been slow is because of the cost of transportation is high. Once the rail port goes through then drilling will pick up, later 2015 or early 2016. In meantime stay away from land men that will sell your lease and make more money than you will. Do some research on a working interest also known as joint participating and keep 100% of the value of your oil just not 18% or 20%. Patience is your friend let that lease expire.
Remember that taxes will take up 34% of your bonus money.

I agree with John Murray, there are a lot of silly high numbers being stated. And if you hold out long enough you just might not see any activity at all. I know of numerous areas within the Williston Basin that you could not get $50 an acre for a lease now. The Bakken does have its limits just ask Chesapeake how it felt to drill 6 dry holes in a row after spending nearly 1/2 of a billion dollars on leasing. I know numerous people that have held out when the rest of the family leased only to find out that they could only get 1/2 of what the rest got and a month later they couldn’t even get that. Minerals are a commodity that move up and down in value. Don’t bite your nose off to spite your face. Deal with reasonable people and you will get a reasonable deal. Minerals do you no good just sitting there, let them make money for you. Not everyone out there is trying to cheat you, I know of a lot of landmen that have families with minerals and they don’t want their names tainted because they have gone out and cheated someone.

Mr. Kennedy - Unless you live right here in the Williston Basin I would say your not up to speed. I’m here every day and have been since 1979. You remind me of my know it all cousin. I do not need any lessons from you and unless you can show me Chesapeake’s accounting I think I know a bit more about the Chesapeake play in Hettinger, Stark and Slope Counties than you, their average lease cost was $750 per acre and they purchased 750k acres, you do the math. And also check your facts before you state that they did not complete anything. I do claim to be a landman and a very good one and what do you claim to be? From what I read you must spend the majority of your time on blogs so that implies you don’t do anything but talk, talk and talk some more.

Mr. Bastian, You have taken my prior comment out of context. While I do think that some of the numbers thrown around from time to time on this site are not realistic, I also get really crazy low-ball, bottom-feeder offers from landmen. Once they try that crap, I won’t ever talk to them again. As far as your argument with Mr. Kennedy, my experience with reading his posts is that he is most often correct.

Wow - Some of the advice I’m reading is unbelievable. If you have a small interest within a spacing unit you may want to participate in the drilling of a well as stated, however, if you choose to you will be given a weighted average royalty - the average royalty the other mineral owners within any wells spacing unit received, you will not be given any bonus consideration and your weighted average royalty will remain that way until the operator of the well has recouped 50% of the costs to drill and complete the well or approximately $4 to $5 million. If the oil and gas company can not get mineral owners to lease, they will not drill. If there are a few acres within the spacing unit that wants to participate as explained above they will probably proceed. Just make sure what you are doing, an oil and gas company is not going to spend $8 to $12 Million and give up all of the royalty. A pig gets fat and a hog gets slaughtered.

I know several landmen who don’t care about their names, the signature is all that matters. I do know other landmen that I would trust as far as I trust anyone. I am suing a land company right now due to the actions of several of their landmen.

Jerry, I see that you claim to be a landman.

You should look where Chesapeake leased. Chesapeake came late to the game and was gambling on finding some cheaper acres they could prove up and monetize, they did not lose that much money on the wells because they didn’t bother to complete most of them, possibly none of them. I know because I have a friend who leased with them and CHK did drill a well and he asked me to check what was going on. I really question the number 1/2 a billion too, they just weren’t paying that much and some people never got paid for their lease, typical CHK tactic.

I question your Chesapeake numbers and you ask me to provide proof, where’s your proof? Since you say you have a much better position, it should be no problem for you to provide it, especially since you think it appropiate to ask me for proof.

I claim to be someone who knows the difference between participation and non-consent. I am actually non-consent and everything is working out great.

You remind me of landmen who know nothing about non-consent who spread alot of hot air, as long as we are on the subject of who people remind us of.

Explain risk penalty provision.

Under NDCC 38-08-08 working interest owners (“lessees”) can be assessed a 200% penalty out of proceeds from production of the pooled spacing unit if they choose not to participate in the cost and risk of drilling and completion. However, mineral owners who choose not to lease are provided a cost free royalty equal to the weighted average royalty in the spacing unit agreed to by all those who leased their minerals. The remaining interest of mineral interest owners who choose not to lease is a working interest in the well and can be assessed a 50% penalty out of proceeds from production of the pooled spacing unit if they choose not to participate in the cost and risk of drilling and completion. In either case the paying owner(s) must make an unsuccessful good-faith attempt to lease the minerals or get the working interest to participate. They must also provide proper notice of intent to impose the risk penalty and inform the non-participating parties that they can oppose the penalty before the Industrial Commission.

From the State of North Dakota

Jerry, I can tell by your post that you aren’t up to speed. It’s not participation you are talking about, it’s non-consent. The non-consenting mineral owner will receive the weighted average of what everyone else in the spacing leased for or 16%, whichever the operator elects. Lets just say 16%. The non-consenting mineral owner will receive 16% royalty from the first barrel and the other 84% goes to pay for 100% of the non-consenting mineral owners well cost and and operating expenses then once that is recouped, the 84% goes to paying off the 50% of actual cost of drilling and completing the well penalty.

There is not a huge life changing difference between 16% royalty and 20% royalty unless you have a huge amount of acres {see farmout below]. The bonus amount is usually between 1% and 3% of what the operator expects to make off your mineral acres.

Those lease checks don’t look so good after production falls off 80% and it gets nothing but worse from there. On the other hand, what if you were receiving 75% as much and even 5 years later after recovery of the penalty you started receiving checks 350% greater than those who leased and since the well has already declined, you have the greater income for a longer period of time? Not to mention you have deductions that those who are leased do NOT have, you also own part of the plant. When the operator intends to plug the well you can by law assign your part of the well to the operator and the operator must pay you the salvage value of your portion of the well and you are no longer responsible for any of the well’s bills. Lessors don’t get paid to have their well plugged.

There are alot of moving parts to what might make an operator reconsider drilling a well. Some operators have a bare majority of the working interest on wells they have drilled. Most of the non-operating interests pay their own way, but not all. Think about this, an operator has leased 80% of a spacing at $2,000 per acre 1,024 acres at $2,000 X 1,024 = $2,048,000 plus landman and legal costs of $300 per acre = $2,355,000. How easy is it for an operator to just walk away from that much already sunk cost? If profit from the oil produced is equal to $50,000 per acre, how many acres could be non-consent before an operator would have a fit and walk away? It looks to me like 47 or thereabouts and that is before you figure in the risk penalty. Then if you factor in not only sunk cost but the loss of profit from 80% of the spacing, the operator would be cutting off his nose to spite his face, or as another oil man has said, you never want to get mad at your money, which I take to mean don’t get mad at $25,000,000 profit just because it is not $30,000,000 profit.

If you actually did have alot more acres than the operator would be willing to carry, you have enough clout that you should be able to line up a farmout deal for a greater interest in the well than a 20% lease and you would have tax deductions besides. Believe me, I love my CPA.

I’m curious, how many acres were you calling a few…before you read this?

Right, if you read your original post, you said:

Comment by Jerry L. Bastian 2 hours ago

Wow - Some of the advice I’m reading is unbelievable. If you have a small interest within a spacing unit you may want to participate in the drilling of a well as stated, however, if you choose to you will be given a weighted average royalty - the average royalty the other mineral owners within any wells spacing unit received, you will not be given any bonus consideration and your weighted average royalty will remain that way until the operator of the well has recouped 50% of the costs to drill and complete the well or approximately $4 to $5 million. If the oil and gas company can not get mineral owners to lease, they will not drill. If there are a few acres within the spacing unit that wants to participate as explained above they will probably proceed. Just make sure what you are doing, an oil and gas company is not going to spend $8 to $12 Million and give up all of the royalty. A pig gets fat and a hog gets slaughtered.

Please define Participation. You may as well define Recoup while you are at it.

I also find it amazing that the operator only has to recoup 50%. I thought they had to recoup 100% plus operating expenses and a 50% actual cost of drilling and completing the well. I like your version even better, unfortunately it is not true.

In your post “explain risk penalty provision” you failed to point out anywhere where I stated anything contrary to the law. You did put “mineral owners” in large font but I clearly stated in my post more than once “the non-consenting mineral owner” I said nothing of the non-consenting lessee. I don’t understand your point? I don’t believe you understand your point either.

Jerry don’t you work for Empire Oil ?

Your pay a penalty IF you do not participant, if you pay for the your share of expenses to drill then you do not pay a penalty.

At the end of the day why should a mineral owner share the largest percent of their oil revenue with anybody be it land men or oil company. It’s better just to pay your share of the expenses for the rig, which is your decimal interest percent only not $3 - 6 million. Most mineral owners only have fractional interest in a well, under 1% . So if it cost 5 million to drill then your only responsible for $50,000 that the oil company will hold until it’s paid then you get 100% of your oil after that. So how long does it take a oil well to produce $50,000 for your debt to be paid ? Days or maybe a poor well months. It’s a one time payment and penalties can be avoided. Can you image what 1% of a fairly productive well will bring in per month, usually at least 80% percent more than a 20% royalty with a lease. Plus the rest of the land is not locked into a lease, you get 100% of all the wells on the property.
But the land man is out of the picture without any pay. So don’t let them scare you into a lease…it’s your oil without you they make …zero !
Lease are great for oil companies and land man but not mineral owners.
We have family member that owned less than .00014 with a fair well it took 5 months for his share to pay for his cost and that he was in the
$15,000 to $20,000. per month . His monthly income is more than the bonus and royalty for other leased. Could this be how oil companies make billions ?? Yes it is. Plus he can do the same thing on the land if they drill more wells. So $15000. per well is possible.

Blah Blah Blah Blah Blah

Is there any new news on the Beach rail port?

Good Question ! Do you know Jerry?

No my name is Jerry Bastian, I have worked in the Williston Basin since 1979. I don’t know why you would think I’m from another place I have not tried to contact any of you and do not plan to in the future.

My purpose for involving myself in this group was because I saw comments being made that just were not true!!!

If you all have a problem with that than that’s your problem not mine. I wish you all well and do not believe I will need to add any additional comments, concerns or questions to this group.

Adios

Hello,

Does anyone know if there is any drilling activity (or planned) in the Beach area?

Thanks!

No drilling in the Beach area until maybe next year.