Lease offer for mineral rights in Richland county Montana

Shales Bakken Shale
#1

I recently found out through a brother that we have had an offer to lease some 400+ acres of a total of about 920 acres in Richland county Montana. This is a second offer after being offered $20 acre originally last year. They have come back with an offer of $30 an acre and 8% royalties. This seems extremely low to me and we don't have any experience dealing with this. We didn't even know we had inherited these mineral rights until they had found us through research. I have a description of the property but don't have a clue if there is any productive wells in the area and don't know how to find out. Any advice would be greatly appreciated!

Glen

#2

Glen:

You are right in that these lease amounts are extremely low for the Richland County area which is a "proven" area for production. Looking at the past public sales in the Richland Coutny area it appears in March bonus amounts ranged from $435 - $1500/acre. Petro Hunt was one of the successful bidders at this auction so I would contact their land department and advertise your mineral holdings. Also, I would try to get a lease negotiated for no longer than 3 years with at least 18% royalty. Keep in mind that these bonus amount are probably a bit higher than what you might recieve but shop around to get your best amount. You can google the "Montana Mineral Mangement" website to view the results of the past public sales in the Richland Coutny area. Good Luck!!

#3

Thank you Charles. You know it's funny though, Petro Hunt is the one making this offer! I have tried doing research on all of this and have become a little familiar but feel I've only touched the tip of the iceberg. My brothers are becoming anxious to accept something much smaller but I need to get informed so I can help educate all of us. Is there a way to look up parcels and others close to see what may be going on in the area? I will google the "Montana Mineral Management" website as you suggest.

I really appreciate your suggestions!

#4

Glen:

You can research that Montana Mineral Mgt. website and find lease sales around your area. You did not state what your Township/Range /Section but you should find something close to you which leased over the past two years. Advice to you and your brothers..........Avoid getting too anxious in regards to lease negotiations as this is a bad mistake. As I said earlier, shop around for the best deal and don't take first offers.

Glen Gierke said:

Thank you Charles. You know it's funny though, Petro Hunt is the one making this offer! I have tried doing research on all of this and have become a little familiar but feel I've only touched the tip of the iceberg. My brothers are becoming anxious to accept something much smaller but I need to get informed so I can help educate all of us. Is there a way to look up parcels and others close to see what may be going on in the area? I will google the "Montana Mineral Management" website as you suggest.

I really appreciate your suggestions!

#5

Charles. I have been searching that website and can't find any info regarding lease sales that I can decode. Here's the legal description of our mineral right's area.Township 21 North-Range 56 East. Section 14: E/2, Section 15:ALL. Richland Co. MT. It adds up to about 920 acres and is in the Sidney area.

Do you have a link that may take me there directly?

Thanks again,

Glen

#6

Glen:

I don't know of a direct link to find your infomation. If you will go to that website, it will indicate the lease sales by Month and under each Month it will indicate "SALES RESULTS". Click on the sales results and scroll down to Richland County. It will show the Township/Range/Section and the bonus/acre it sold for along with the successful bidder. It appears going back over a couple of years that Yates Petroleum Corp. has been active in bidding on the minerals in Richland County. I don't know who they are but probably they are a brokerage firm who leases minerals only to sell the leases to another oil company. This is common practice in the leasing procedure. I would google "Yates Petroleum Corp" and contact them to see if they would be interested in your area.


Glen Gierke said:

Charles. I have been searching that website and can't find any info regarding lease sales that I can decode. Here's the legal description of our mineral right's area.Township 21 North-Range 56 East. Section 14: E/2, Section 15:ALL. Richland Co. MT. It adds up to about 920 acres and is in the Sidney area.

Do you have a link that may take me there directly?

Thanks again,

Glen

#7

http://bogc.dnrc.mt.gov/ Go to this site and click on webmapper, it will show u all existing wells as well as permits to drill and production results for existing wells. Clicking on the weekly reports will keep u abreast of new permits etc. On the webmapper u can see what companies hold the rights to existing wells and permited wells

#8

Glen, all companies that lease make the lowball offers if they think it’s coming out of the blue to an unsophisticated mineral owner. How do you think they got to be rich ? In a hot area they do less of the lowball stuff, probably because it alienates a mineral owner who has some idea of what his minerals are worth. I shudder to think of what you would net after costs, production taxes and income taxes on 8%.

Glen Gierke said:

Thank you Charles. You know it's funny though, Petro Hunt is the one making this offer! I have tried doing research on all of this and have become a little familiar but feel I've only touched the tip of the iceberg. My brothers are becoming anxious to accept something much smaller but I need to get informed so I can help educate all of us. Is there a way to look up parcels and others close to see what may be going on in the area? I will google the "Montana Mineral Management" website as you suggest.

I really appreciate your suggestions!

#9

Thanks to some great help from Buddy Cotten we were able to improve the offer to $300 acre for 4 years and 1/6 royalty but the best thing was to remove and change some wording in the lease that would have had us eating some cost that we shouldn't have to. They were really pressuring us to close this deal because they said they had moved to another project or something.

We were always on the "we need to know by tomorrow" schedule and it really felt strained. I believe we could have done better yet but the feeling of the carrot being yanked at any moment was there.

#10

We have had much difficulty negotiating with Petro Hunt over the years and have yet to sign a lease with them. They love to play hardball. You should be able to get a minimum of 3/16 royalty, if not 1/5 in that area.

#11