Just negotiated/signed a lease...now the fun part

Oil and Gas Leasing Help
#1

I own 1/4 interest of 320 acres in Niobrara County, WY. After a couple of months of "back and forth" with the oil corporation we finally came to terms. Whew.

I want to thank all of you who recommended Mr. Buddy Cotten to me. He has been very helpful with guiding me through this process. I cannot say enough good things about him and highly recommend his services. Thanks Buddy!

~

Now the fun part (besides the signing bonus money...lol):

I have been frequenting these sites in trying to figure what a decent oil well produces in this area of the country.

http://www.eser.org/

http://wogcc.state.wy.us/

Pretty hard to decipher for me.

Anyone know what a well needs to produce in oil bbls/day in order to be worth the oil company's time and effort?

What are the bbls/day from a poor producer to a good producing well?

As far as natural gas goes I don't think there are any pipelines near my property. Doesn't NG require piping otherwise they flare it off? That's a shame.

Thanks again everyone I am learning a lot...glad I found this site!

Ned..aka: Ted

#2

Ned:

When trying to decide if a well is economically feasible for an operator to produce, first of all, alot depends on the price of oil per barrel. As the price of oil drops, there will be point that the well is possibly not producing enough oil per day to operate and make a profit. There are many factors that exists in wells that determine the profit margin. Factors such as downhole expenses, etc. as the well gets older and the production declines. When comparing a good well to a poor producer, the area is another factor. In the heart of the Bakken, a 300bbl/day well may be considered a poor producer while in another area, this would be a great well. I think it all hinges on the price of oil and of course the production amount. You are now at the point where you really can't control anything except recieving your royalty check or negotiating a new lease when this one expires.

#3

The cost of a horizontal well is more in the neighborhood of 8 million dollars upon completion. As for these under producing wells, you can bet that if an operator has already spent nearly 4 million dollars to drill and complete a well, then they will take every downhole procedure to improve this production. In most cases, the company has a group of investors who also have a decision in the outcome of the well.

Joel said:

Ned:

A vertical well in ND Maus 23 cost 3.8 mil per Whiting financials. put that into spreadsheet and run a table of variables, price of oil etc. My guess is that if it does not pay for itself in the first year then it may not be viable.

I am hearing estiamtes of 4-8 mil for a horizontal well.

#4

I found this interesting tidbit regarding the area of the property I own:

~~Converse County hasn't been just a hot spot for drilling into the Niobrara. Operators are increasingly active at sites between Douglas in Converse County and Wright in southern Campbell County, Doll said.
"I expect that to continue the rest of the year," he said.
The activity in that area is caused by better production rates from wells drilled into underground formations known as tight sands -- the Parkman, Sussex, Turner and Frontier formations, Doll said.
Those wells start out at the equivalent of 700 barrels per day, slide to half that within three months, but sustain those production rates longer than the Niobrara wells in the state, he said.~~

http://billingsgazette.com/news/state-and-regional/wyoming/article_c867c4cf-dddf-556d-b7d0-9d34740ef895.html

#5

Joel:

I didn't mean that the vertical well would be changed to a horizontal, only that downhole work, acidizing, etc., might be done on the vertical well to increase production. There are numerous old wells, all of which are vertical, that require this type downhole work in order to increase production. Sometimes, this same procedure is conducted on newer wells if neccessary.

Joel said:

Charles:

so are you saying that Whiting would not be satisfied with Maus 23 being a vertical and only doing 300 bopd, that they would want to eventually turn it into a horizontal.

maybe when they are done with Nistler H that is what they are going to do.



charles s mallory said:

The cost of a horizontal well is more in the neighborhood of 8 million dollars upon completion. As for these under producing wells, you can bet that if an operator has already spent nearly 4 million dollars to drill and complete a well, then they will take every downhole procedure to improve this production. In most cases, the company has a group of investors who also have a decision in the outcome of the well.

Joel said:

Ned:

A vertical well in ND Maus 23 cost 3.8 mil per Whiting financials. put that into spreadsheet and run a table of variables, price of oil etc. My guess is that if it does not pay for itself in the first year then it may not be viable.

I am hearing estiamtes of 4-8 mil for a horizontal well.

#6

What I am finding, as I go from one discussion to another, is the lack of quid pro quo from the

discussion starters....like Ned here...I bet some of us would like to hear the results of your negotiated lease.

What did they start with, and what did you end up getting? As far as the well production question...Has there

been a permit filed to drill a well on your leased land? Is there one planned in the next 3 years or during the primary term of your lease? What is the typical pooling acerage for your area? 640? 1280?

These are more important questions for you to have the answers to then whether or not someone here can tell you that you are set to be the newest Beverly Hillbilly.

#7

You the man Joel! (do people still say that?)

I have 3 mineral properties in the Bakken, ND. 90, 10, and 10 acres.

The unsolicitated lease offers are $1,ooo acre, 3yrs, and either 3/16 or 20%. (both are common starting points now it seems, pertaining to the royalty interest that is.

I haven't negotiated a lease yet. I understand the importance of the Pugh Clause and knowing who the big player in the section is. So a county recorder website would be key for that....I notice you mentioned 3 sections....so you know about the Pugh clause too.

#8