I received a Fed Exp envelope today from Parsley Energy.
They said they are the current Lessee to my oil and gas lease.
My property description is:
SW/4 of NE4 Section 19, Block 7 H&GN Survey A39;Reeves County.
SE/4 of NW/4 Section 19, Block 7 H&GN Survey, A-39, Reeves County.
I leased it in Jan. 2015 for three years to Petro-Land Group (PLG Inc.).
This paperwork mentioned my name as the Lessor and the Lessee as Anadarco E&P Onshore LLC.
The Lessee mentioned in all the sections where the horizontal drilling may be done is Steward Energy. There are 11 people listed with Steward Energy and I'm the only one with Anadarco E&P listed.
Here's a paragraph from the cover page:
"The Production Sharing Agreement details allocation of payment on a horizontal wellbore in a way that is mutually agreeable and allows us to permit wells as Sharing Wells with the Texas Railroad Commission".
It also mentions the "Declaration of Pooled Unit for the Bota Unit".
I received a business card from a person listed as "landman" with the paperwork.
Any comments and input will be greatly appreciated.
Thank you.
Susan Titus
Susan - sounds like you are about to get a horizontal well drilled on your property so congratulations on that! Parsley wants to drill the well but the production unit will include several different tracts owned by different working interest and mineral owners. Parsley wants to allocate the proceeds from oil and gas sales to the different tracts based on their pro rata share of the acreage they contribute to the production unit. Moreover, it's often based on the perforated portion of the wellbore in each tract. Basically, you end up getting your lease royalty rate for the fraction of the production unit your minerals make up. You should be able to contact the landman and he or she can explain the calculation in detail.
Thanks, Marcus.
I guess everyone who has property in those sections where they want to drill will have to agree and sign the paperwork.
If someone holds out maybe it won't happen.
I'm pretty sure they don't have to get approval but are just letting you know how they are going to allocate the proceeds. I've been in similar situations under different operators where I never received anything until after the well was drilled and completed. This issue has been a hot one in Texas because it pretty well amounts to forced pooling.
It sounds like your lease (or perhaps someone else's) does not allow for pooling, or has a limitation on what can be pooled. Generally speaking I am of the opinion that Pooling is fair so long as a portion of your tract does not get excluded from a unit. You are probably ok to sign but I would at least call and ask why this is necessary and have them explain the unit size and make sure both tracts are included in the unit (you should be able to determine that from the paperwork).
I am still getting offers from companies wanting to buy my mineral rights
I'm wanting to know how much I could potentially get a month if Parsley drills a successful well.
I haven't been able to get an estimated amount.
I have to weigh whether it would be better to get $120,000 and sell or wait to see if a successful well is drilled and get checks for a long period.
Being 65 years old, I can't wait too long to get checks that would total $120,000 and be worth waiting.
Thanks.
Susan
That’s a good question, Susan. I, too, am interested in any responses you might get.
Susan/Linton,
Based on all of the posts by Susan, I believe the $120,000 amounts to approximately $13,500 per acre. Assuming a 20% royalty, 640-acre production unit, and $55 oil (added some to allow for gas sales but also keep calculation simple), it would take 785,455 barrels of oil production to recover the same amount of royalty as the lump-sum $120,000. That level of production will definitely take more than one well to achieve at least in any reasonable number of years. Two good wells for that area could maybe get there in 5 or 6 years in my estimation, with as much as half coming in the first year and then the rest being collected much more gradually over time. Just my two cents and some "back of the napkin" math.
Thanks for the reply, Marcus T. Hypothetically, if you were to sell a portion and keep a portion, do you have any “back of the napkin figures” and/or suggestions?
That's certainly an option and the math would work the same for the acres sold. Then one would have some upfront money in the bank and keep some acres in play in case oil prices go up again and/or the operator drills 8 wells in the next year. It's hard to make a suggestion as everyone's needs and situations are different.
That’s great to hear, Marcus T; sounds more encouraging to me, too. I can’t believe what a totally difficult decision it is trying to decide how to manage minerals. Like you say, each case is so different. And if I were 20 years younger with kids, I doubt I’d even be considering selling even a portion. Thanks again for your input. I think it helps everyone to toss these ideas around and learn of different possibilities. I appreciate your time. Linton
Hi Linton,
Do you have minerals in Section 19, too?
Negative, Susan. I have very small interests in BLK C-8, SEC 26, BLK 51, Sec 8, and BLK 7, SEC 1. But, like you, I’m trying to decide whether to sell or hang onto it. I would not sell for $14,000/nma, though… Linton