Our family leased acreage in 2008 to an oil company in Winkler County for $300/acre. Two wells are now producing efficiently on that land.
Recently we received an offer from the same oil company for adjacent acreage for double the bonus offer. Many family members, including me, immediately accepted the offer and are awaiting our bonus checks. But, folks closer to the property, "on the ground" and familiar with leasing activity in that county, are hesitant to accept the bonus amount, citing instances where leases have been transacted recently in close proximity to this acreage at over $1000 per acre.
My question is this. Is it likely that the oil company will:
1) eventually negotiate with those family members/mineral rights owners who feel as tho a fair offer would be a great deal higher? If so, would those in the first (conservative) group, be compensated at the higher rate as well?
2) If no agreement can be obtained after the oil company owns 50% of the leases, will they likely abandon their plans for this acreage? Or will they/can they sell the leases they have obtained from the (conservative) group to another entity?
Any insights provided would be very much appreciated!
C.D. Gardner
c.d.:
If the same company just completed two wells on the adjacent property, depending on the production amount of these wells, most likely they will be willing to offer their max bonus for your acreage. By all means, don't be in a hurry to sign, market your minrerals based on the proximity of proven production. If the company obtains the % of acreage to drill, and you remain unleased, you might think about well participation. Again, take your time and don't get in a hurry as it sounds like you are in a good negotiating position.
C.D.G. , That's a good question and Charles gave a good answer. I am familiar with the lease situation you are talking about. Proximity wise, I know that the acreage you are talking about is within 1/2 mile SW of a horizontal well that came in at 450 Bls oil/day and is still flowing 300-400 bls/day more than 6 months later. Another horizontal well is permitted 1/2 mile east of your acreage and the well site was being prepared last week when I was in the area. Considering that leases are going for up to $2000/acre a few miles south in N. Ward County and $1500 in Reeves County, not to mention over $1000/ acre paid about 2 miles west of your acreage------------sounds like you are in a good negotiating position. The other horizontal well you mentioned is located approx. 3 miles north and is flowing oil, but no word is out yet as to daily oil production.
Charles, do you have any idea on what percentage of ownership a company would want to have before they would feel comfortable with starting to drill? Also, would you comment on well participation as you understand it and what do companies think about the well participation of Royalty Int. owners.
charles s mallory said:
c.d.:
If the same company just completed two wells on the adjacent property, depending on the production amount of these wells, most likely they will be willing to offer their max bonus for your acreage. By all means, don't be in a hurry to sign, market your minrerals based on the proximity of proven production. If the company obtains the % of acreage to drill, and you remain unleased, you might think about well participation. Again, take your time and don't get in a hurry as it sounds like you are in a good negotiating position.
P.L.:
The company that drills must have the controlling interest in the spacing unit or at least that is my understanding. Well participation is another matter which I have never dealt with as I have always leased. Mr. R.W. Kennedy, another individual on this website, has been involved with well participation and is knowledgable about the ins and outs of this type involvment. You can pull up some of his past discussions and read what he has to say about this matter. It all boils down to the fact that eventually, instead of you being paid a 18 or 20% royalty, you will recieve 100% based on your holdings but again, I am not familiar with the details involved.
P.L. Williams said:
C.D.G. , That's a good question and Charles gave a good answer. I am familiar with the lease situation you are talking about. Proximity wise, I know that the acreage you are talking about is within 1/2 mile SW of a horizontal well that came in at 450 Bls oil/day and is still flowing 300-400 bls/day more than 6 months later. Another horizontal well is permitted 1/2 mile east of your acreage and the well site was being prepared last week when I was in the area. Considering that leases are going for up to $2000/acre a few miles south in N. Ward County and $1500 in Reeves County, not to mention over $1000/ acre paid about 2 miles west of your acreage------------sounds like you are in a good negotiating position. The other horizontal well you mentioned is located approx. 3 miles north and is flowing oil, but no word is out yet as to daily oil production.
Charles, do you have any idea on what percentage of ownership a company would want to have before they would feel comfortable with starting to drill? Also, would you comment on well participation as you understand it and what do companies think about the well participation of Royalty Int. owners.
charles s mallory said:
c.d.:
If the same company just completed two wells on the adjacent property, depending on the production amount of these wells, most likely they will be willing to offer their max bonus for your acreage. By all means, don't be in a hurry to sign, market your minrerals based on the proximity of proven production. If the company obtains the % of acreage to drill, and you remain unleased, you might think about well participation. Again, take your time and don't get in a hurry as it sounds like you are in a good negotiating position.
Thanks so much for the very helpful information!!
charles s mallory said:
P.L.:
The company that drills must have the controlling interest in the spacing unit or at least that is my understanding. Well participation is another matter which I have never dealt with as I have always leased. Mr. R.W. Kennedy, another individual on this website, has been involved with well participation and is knowledgable about the ins and outs of this type involvment. You can pull up some of his past discussions and read what he has to say about this matter. It all boils down to the fact that eventually, instead of you being paid a 18 or 20% royalty, you will recieve 100% based on your holdings but again, I am not familiar with the details involved.
P.L. Williams said:
C.D.G. , That's a good question and Charles gave a good answer. I am familiar with the lease situation you are talking about. Proximity wise, I know that the acreage you are talking about is within 1/2 mile SW of a horizontal well that came in at 450 Bls oil/day and is still flowing 300-400 bls/day more than 6 months later. Another horizontal well is permitted 1/2 mile east of your acreage and the well site was being prepared last week when I was in the area. Considering that leases are going for up to $2000/acre a few miles south in N. Ward County and $1500 in Reeves County, not to mention over $1000/ acre paid about 2 miles west of your acreage------------sounds like you are in a good negotiating position. The other horizontal well you mentioned is located approx. 3 miles north and is flowing oil, but no word is out yet as to daily oil production.
Charles, do you have any idea on what percentage of ownership a company would want to have before they would feel comfortable with starting to drill? Also, would you comment on well participation as you understand it and what do companies think about the well participation of Royalty Int. owners.
charles s mallory said:
c.d.:
If the same company just completed two wells on the adjacent property, depending on the production amount of these wells, most likely they will be willing to offer their max bonus for your acreage. By all means, don't be in a hurry to sign, market your minrerals based on the proximity of proven production. If the company obtains the % of acreage to drill, and you remain unleased, you might think about well participation. Again, take your time and don't get in a hurry as it sounds like you are in a good negotiating position.