Lease of Mineral Rights

Hello - I own an undivided 1/4 interest in the mineral rights for 360 acres in Finney County. The land is owned by the Graham family. I advise my sister (1/4) and my cousin (1/2) on the business aspects.

We were recently approach to lease the mineral rights for $100 per acre and 1/16 share of production, but a local oil businessman told me we should wait for a better offer because his computer charts showed that to be a 'hot' area. So we turned the offer down.

Did we make the wrong decision? Anybody!

Kind of depends on where in Finney County the land is. Northern Finney was hot a few months ago, but several of the companies have pulled out. Post the legals and I can give you a better idea of what the going rate is.

Thanks for the reply. Section 31, 21 South, 34 West, Finney County, Western KS Miss Chase

John Jameson said:

Kind of depends on where in Finney County the land is. Northern Finney was hot a few months ago, but several of the companies have pulled out. Post the legals and I can give you a better idea of what the going rate is.

I would say you are probably in a good area to get around $100/acre maybe $125/acre, but it may be too late. Oil has dropped off and so has the leasing activity. Also I think you may have meant 1/6th on the royalty which seems pretty fair, but you may want to ask for 3/16th. If you want email this guy he will probably have a client who would take a lease on it.

Phillip Boone

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Not an expert on this, but I have been getting offers from several companies to BUY all my interests in Finney, Morton and Stafford Counties. I have no interest in selling my interests in any of these areas (these interests have been in my family for 5 generations, and the surface was only sold off 15 years ago). I'm very cautious about all of this; the amounts being offered I would class as predatory fishing. Since production from my gas wells in these areas has diminished significantly over the last 6 years, I was curious why the flurry of offers. Last week I received notice from Linn Energy (who recently bought my leases that have been with BP for years) of their intent to form an Alternative Tract Unit in Morton County which would include several active wells, a couple plugged and abandoned. I also have some other producing wells in close perimeter areas within a mile or two of the proposed ATU that has already been approved by the State of Kansas providing they get 75% of the owners to agree to the ATU. As near as I can tell at this point, most of the perimeter well owners are my siblings.... and I'm not sure what they will do if anything. The landman contacted me a few days ago, and it sounds like they are in a hurry. As I said, I'm far from an expert on ATU's, but according to the Landman, they intend to frack in the area to get at the tight gas. Because of the perimeter wells, I'm concerned that if I don't agree to the ATU, there is a possibility that there could be drainage from the close perimeter wells that are producing - which could be a gain or a loss. I have no idea, and very little time, to discover who owns any other existing wells in the target ATU, and the landman said its hard to know how this could break. This doesn't really answer your questions, but thought you might want to know that there is a flurry of interest in this area again - which seems to be driven by the State's recent approval of formation of ATU's. I have no advice for you - just passing on the info that there is new interest in some areas of the Hugoton Field - fracking is a whole new ballgame that it attracting new investors - which always makes me nervous.