Hello Mineral Rights Forum,
I am curious about lease bonus rates in this area. My client has a 120 net mineral acre interest in Section 2, T153N, R100W. It was previously leased for $200/acre, and there are some productive wells in the area although not on my client's land. Any information you can provide would be extremely helpful in beginning negotiations.
Best,
CK
Chad,
Your client has minerals in a very active are and I would be surprised if the land isn't HBP or force pooled. I see records of bonus amounts exceeding $11,000/acre in the general area a few miles away and the BLM auctioned some land nearby recently. I'm sure it was expensive. You may be getting offers to purchase these acres. At any rate, if not HBP, and the lease terms set by regulation, a good evaluation and plan would certainly pay off. If you have a choice of operators to deal with, some are better than others in the area.
Mr. Hutchinson,
Thank you very much for the input. If you have knowledge of some better than average operators in the area in terms of lessor interaction, I would be grateful for input via email (ChadMKell@gmail.com).
Thank you again.
Best,
CMK
Mr. Kell, Statoil is already in the process of drilling 6 wells in that spacing, 2 drilled and awaiting completion and 4 wells "spud" commenced drilling. You have a few very rare and excellent opportunities, the least of which would be in my opinion, leasing.
Mr. Kennedy,
Thank you for taking the time to reply to my post. I have communicated with my client that time is of the essence. Could you elaborate on some of the alternate arrangements that you mentioned above? I would be grateful for some advice via email (ChadMKell@gmail.com).
Best,
CMK
r w kennedy said:
Mr. Kell, Statoil is already in the process of drilling 6 wells in that spacing, 2 drilled and awaiting completion and 4 wells "spud" commenced drilling. You have a few very rare and excellent opportunities, the least of which would be in my opinion, leasing.
For the operator to make the kind of money off your clients oil, he must lease him, probably for 20% and some amount of cash up front. The cash up front for the value of 80% of the oil is almost assuredly less than 3% of the value of 80% of the oil. Your client could work a farmout deal that would be equivalent to 30% or more royalty with a partner who put up the participation cash and provides the expertise for the 70% share. Your client could be non-consent, receive a 16% royalty from the first barrel while 84% of their oil goes to pay for the cost of the well and a 50% of the actual cost of drilling and completing the well risk penalty. Until the well pays out and retires the risk penalty and your client became a full working interest, he would not owe anything out of pocket for the drilling/completing of the well. The most the operator could do would be to place a lien against the production of your clients minerals, the production only. From the multiple wells that are being drilled in that excellent area by an excellent operator, you would have a slightly greater chance of tripping and falling UP than that would not find a significant amount of oil.
Lease 20%
Farm out 30%
Non-consent 60% to 80%
Take your pick.
Recommended reading: NDCC 38-08-08
With the above on the trading table even in a lease, you should be able to do better than 20%.
If you decide non-consent, that does not mean you are always non-consent in the future, my operators tell me every time I talk to them that if I ever needed the money and wanted to lease that I still could, to them. I wonder why that is? There is also the option of participation in future wells if you are non-consent. Leasing closes off practically all options outside of selling your royalty or your minerals, for which you will of course get less money. It's really hard to make a great deal of money if you sell 80% of what you have for 1% to 3% cash up front. Good luck.