Tis 1/6 of production, $200 paid up for 3 years, .238 of 40 acres.
Plus a shut in clause.
LIKE REAL ESTATE, LOCATION LOCATION, LOCATION.
GARY L HUTCHINSON MINERALS MANAGMENT
A lease option ? or a lease offer ?
Lease offer. .238 mineral acres. lease would not terminate as long as wells are producing.
In Duchesne county Utah. TS 3S 2W 28.
The money is not inconsiderable for such a small interest but I would want more royalty although no matter what you get in royalty, it isn't going to add up to much. In fact, on such a small interest I would look favorably on a reasonable offer to sell because if you do not already have title in your name it could cost more for a probate than you would ever receive, not to mention that a contract (lease) will not protect you if it would not be cost effective to enforce the contract and the lessee would know that, they will do whatever they please which may include not paying or underpaying you. To have real protection in a lease you need the help of an oil and gas professional and there just isn't enough money in .238 acre to pay for one. I would recommend that you sell if you can and that you consider the risk of entering into a contract for such a small amount of money. Good luck.
Thanks.
(Example Only)
Would my calculations be correct as follows if a rig on my property produced 1000 bbls month?
(My interest) .2381 X (Royalty 1/6) .166667 = (share) .039683
AND
(oil) $85 BBL X 1000 bbls mo. = $85000.00 gross X (share) .039683 = Appx. $3373.00 Mo. gross ???
Thanks,
I think you forgot you'd have to share a little of that with someone else. It would be a fantastic well that produced 1,000 barrels a month from each .238 acres. Depending on the pool/spacing/ the number of acres that receive payment. Think $85,000 gross divided by 640 or possibly more acres roughly divide the $85,000 BY 2690 to get the gross of your acres then multiply by your royalty then figure the state and federal government get 40% of your gross. In the above scenario I see you getting about $5 a month, before taxes. There are smaller well spacings where your tiny acreage would not be so dilute. I think you'd need to have a monster of a verticle well on a 40 acre spacing to get past lunch money amounts. I think keeping track of the royalty won't be worth the hassle. Even with a 160 acre pool that's $20 a month before taxes. Sorry.
Travis Hilkey said:
Thanks.
(Example Only)
Would my calculations be correct as follows if a rig on my property produced 1000 bbls month?
(My interest) .2381 X (Royalty 1/6) .166667 = (share) .039683
AND
(oil) $85 BBL X 1000 bbls mo. = $85000.00 gross X (share) .039683 = Appx. $3373.00 Mo. gross ???
Thanks,
Thank you R. W., it does apear that my interestss are now negligible. I am however to meet with a representative of NFX to be sure.
I hate to be the bearer of such bad news. The fact is that over time even your sub 1/4 acre could produce $25,000 over time but your cut would be .1667 of that spread out over decades and to really dampen your expectations, subject to production and severance, probably at least one state income tax, federal income tax.
Travis Hilkey said:
Thank you R. W., it does apear that my interestss are now negligible. I am however to meet with a representative of NFX to be sure.
So, a percentage of almost nothing is almost nothing. As long as I may not be messed up over the whole deal, I was not aware of the potential before so as I had been getting nothing before.......any to me may be a plus? Unless it costs me more than any I might recieve huh?
Again, much thanks, it looks like my mineral interest in the 40 acres in question now may be quartered. So now it may actually be 1/16th of 1/6th of any production plus all the taxes, deductions and fees you indicated. So, perhaps not even coffee money....LOL. Also, to sell my rights may not even be worth my time. Still, I made the meeting request so shall attend.
Thanks again for your assistance.
Ouch! Just remember the value of what this is about. Would you take on a business partner for coffee money? There should be a minimum amount that has to be reached before you will set your signature to any contract. They have lawyers and standard contracts and they won't offer you enough to hire one of your own. If they have forced pooling in your state, I'd just let things take their course.
Wow! Thanks, As I indicated the actual property is Duchesne County, TS 3S 2W U.S.M. Setion 28, NESE. They tell me that they have a rig stacked and ready to move on the land, could be a ruse to get me to sign quickly but their rep made mistakes on the paperwork so I do have some time to figure all things. Plus I have looked at surrounding production and surveys of oil potential production on a ten year plan. (NFX Prospectives)
Also, I do think that they have forced pooling in my case.
Forced pooling is not always a bad deal. I would research the rules for forced pooling in Utah.
Ok, may I ask how in my situation, pooling may be of benefit to me please?
Again, much appreciated.
May I please ask also, in what capacity do you work?
I thank you very much for your input.
Mr. Kennedy,
You must understand that I had to ask. No bad intended.
What may be a wedge valve?
If Utah forced pooling is based on Oklahoma pooling the operator will have to state which formation they are trying to produce and they may have no rights to formations above or below, which would be in essence a depth severance clause. Also you may be paid the average of what everyone else leased for, this could make a difference when you have limited negotiating power due to having a small interest. In other state the forced pooling says the operator gets to recover the cost of drilling [Colorado, Montana] and you become a working interest after the operator recovers his cost, North Dakota allows the operator a 50% penalty in addition to recovering costs, still not a bad Idea in my opinion I have wells in ND in which I was force pooled and I'm happy. Forced pooling is not as ominous as it sounds for the most part. Wyoming may be the exception, there force pooled mineral owners seem to be treated the same as lessees in other states that refuse to participate in the cost of wells and are subject to larger risk penalties than the other states mentioned. I wouldn't consider participation, not enough upside to make any headache at all worth it. The same goes for leasing though. It doesn't sound like enough money for me to put my signature on a contract, that someone else wrote to benefit them. Good luck!
It's a type of gate valve with a wedge type gate. Are you interested in the stem riser type or stationary stem?
Travis Hilkey said:
What may be a wedge valve?