Any idea what a lease should currently go for in Hughes County, 6-8N-12E and 22-8N-12E? I received a well proposal letter from Calyx offering $50 per acre with a 3/16 royalty. They’re planning to drill multiple wells targeting the Woodford formation. I know things aren’t good at the moment, but that seems awfully low. I was easily getting $500 and 1/5 in the same township/range not long ago. Trying to decide if I should just let them pool me.
Yep, that is a tough call. Personally, I’d prefer $0 & 1/4 unless you own significant acres.
It’s 25 acres. I would love to get $0 & 1/4, but my past experience with Calyx is that they won’t negotiate. And they won’t even do 1/5 anymore.
I would also go with the highest royalty offered.
Kaiser Francis pooled section 22 last year for $500 1/5th royalty. Kaiser also pooled section 6 for the same and they had a year to drill as of Nov 18, 2019. Were you leased at that time or were you pooled?
There are six months left before that pooling expires. I would wait a bit and see what happens.
I believe I was under lease at the time of the pooling so I wasn’t included, however the lease expired very shortly afterward.
You could try calling Kaiser and seeing if they want to lease since they have the pooling. Until this supply and demand crisis passes, there may not be much drilling at all, or I would wait until a well was truly pending and then lease at the going rate then.
Well Calyx sent an AFE for each section and listed 5 different wells. Said I needed to respond within 10 days, before they file. I’m leaning towards not responding, but I’m sure I will then be listed in the poolings. Anyway thanks for your advice.
If you do not respond, than they will force pool you to the lowest royalty rate.
That letter is normal. You do not have to respond to it. Can just wait for the pooling. Maybe they cut a deal with Kaiser and they are going to operate instead. Did you get all the OCC case papers for each one? If not, you can look them up yourself.
So if the pooling order was issued 6 months ago for $500 per acre and 1/5, but I was not included due to being under lease at the time, can they really come back now and pool me for 90% less bonus and a smaller royalty ($50 and 3/16)? Will the OCC accept that just 6 months later?
Yes, given the current market conditions, the poolings will probably be smaller in the near term.
Hi Randy, I think you might be able to make the argument that they missed you on the first pooling in 2019. You were under lease, but they didn’t commence operations on your acreage within the term of your lease. If they wont play ball, I believe they would likely have to file a “clean up” pooling application in order to make sure you had notice of pending action on your acreage. It costs a considerable amount of time and effort on OCC applications, a prudent operator would honor terms in the 2019 pooling in my view. My two cents for you.
You can approach them and ask to lease at the pooling rate, but given the recent collapse in prices, don’t be surprised if they balk.
Their Landman called me the other day and indicated they wouldn’t go too much higher than their offer letter. I suppose I’ll just sit back and see how they intend to proceed from here. I was a little taken aback by him telling me it had been 4 or 5 years since any leasing was done in Hughes County for $500 per acre. I knew that not to be the case. Anyway I realize it’s a different story now. Thanks for everyone’s opinion and suggestions!
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