Just to add to the discussion and perhaps provide some information that would be helpful to mineral owners in the process of leasing in Williams Co I submit the following.
Our family has 45+ acres Twnshp 154 Range 100 Section 7 in Williams Co. We recently leased to Brigham for $2200 per acre @ 20%. I negotiated with Brigham on the bonus and royalty fraction but I brought in a local attorney firm to read, adjust and approve the lease as a whole. I am not a oil & gas professional and believe it is a mistake to sign a lease that hasn't been reviewed by a competent attorney. Dealing with Brigham has been a positive experience so far. Brigham promptly paid the bonus with a check but they have yet to drill. I hope this is helpful for those still in the leasing process.
Thanks for the info as our Williams County mineral lease will be expiring in July of 2012 and possible top leasing prospects might begin in January or February. Our minerals are located in T157N;R103W and permitting is getting active in this area. I will have to get serious in the near future on what bonus amounts this area will bring.
A top lease is when an operator leases your minerals prior to the lease expiration date. For instance, if ABC company has your minerals leased until July 2013 and XYZ company contacts you in January of 2013 offering a lease upon expiration of the ABC company lease, and a lease agreement was made, then XYZ has top leased your minerals. In top lease cases, sometimes the company top leasing will put 10% down to hold the lease but if ABC company drills on you prior to the lease expiration, then XYZ company would loose the money put down. Usually, a top lease occurs within 6 months or sooner from the lease expiration date. I have done this twice and everything worked out great. I currently have minerals in Williams County and they expire in July 2012. They are located in T157N;R103W area. What part of Williams County are your minerals located in?
JimS said:
I have a lease in Williams Cty expiring in July 2013. What is a "top lease"?
Our minerals span 4 - 1/4 sections in 158-103. There is a new producing well in Sec 21. There is a permit to drill on one of the adjoining sections, but apparently nothing yet for the other two. Is there such a backlog of undrilled leases that drilling tends to occur just ahead of lease expiration?
Is top leasing becoming more prevalent that it may have been in the past? Thanks for your reply to the definition of a top lease. One follow up question: when you say the oil company doing the top leasing puts up 10%, do you mean 10% of what they are willing to offer on a new lease? I take it the 10% is what they are willing to gamble that the original leasing company won’t get to the drilling.
You are located just to the North of our minerals. Currently, Marathon has one Section permitted but it is very interesting that this Section on the MT border and the permit is for a 640 acre spacing since these border Sections are small. We have minerals in another Section just East of this border Section but no permit thus far. It appears that Marathon is developing this area but G-3 and Oasis are also involved in the area. You are correct that this area of Williams County (T157;T158) have numerous undrilled acreages. I believe the drilling migration is headed to the West and these areas are just now getting developed. One problem, these areas contain numerous acreages that are nearing expiration and yes, the operators tend to be drilling per the expiration date. This is one reason why top leasing is becoming more active. When I was top leased, the operator put 10% of the total lease agreement down. I know that this is a gamble but also I know that they probably have researched the entire situation and is betting that a well will not be drilled prior to the expiration date. Top leasing is a good thing for the mineral owner as many of these leases were leased back in 2008 - 2009 when bonus and royalty % rates were low compared to today. Good luck in your area and hope you get a great top lease and eventually good well(s).
Yes, mineral owners in North Dakota have quite a learning curve to climb to get good oil & gas lease forms. From the ones I've seen, many are simple and basic, and not where most leases will be in 3-5 years, for certain.
I have 10 acres in Twn 153, range 100, Section 21 and 28. I've had two offers in the past week. One for $2000 acre, 3 years with a 20% royalty. The best offer has been from Brigham for $2500 and acre same terms. The spud date to drill this well was 1/26/2011, but due to the system being backlogged I still have a window to lease the minerals, before they are pooled. I know the leases in this area will be expiring soon and don't want to miss out on a good oppurtunity, but want to make sure this is a good deal before I pay an attorney to look over the lease.
I'm not familiar enough with terms in that area of North Dakota to know if it is good or not. I do know the forced pooling law apparently is extremely, extremely advantageous for unleased mineral owners included in a unit. I would think the decision to lease or participate is like many people on this site state, how good is the production in the wells offsetting your acreage. I think there is little doubt that operators like Brigham are drilling wells with a very significant interest in holding acreage as HBP to prevent lease expirations. That is true in shale gas plays. Operators are paying a lot of money for leases, and they want to avoid the risk of expiration and/or the cost of renewals, so it looks to me like they are drilling wells that may be less than ideally economic for no other reason than to hold expiring acreage. That may be the case here. I'm all for mineral owners not leasing if they can afford it. If they need the hard dollars, maybe they should take the lease, but not leasing certainly holds much higher upside than as a royalty owner under a lease. I'm also waiting for royalties to get beyond 1/5th (20%). In some areas of the Bakken they are certainly well justified, where in many areas they probably are not. Operators are stuck in the position of not wanting non-operated working interest owners who are unleased mineral owners. I know they hate that, but I'm sure they don't want to set a precedent for paying 25+% in royalties. Sorry I don't have a better answer for you. I will say that's a lot of money per acre from what I've seen elsewhere on this site. I looked at the production in your township and range, and it doesn't look like there's that many good wells. This tends to confirm my belief that operators are targeting the holding of as much acreage as possible by drilling as few wells as is needed. If I was a mineral owner, I don't think I'd help them with that. Finally, ND mineral owners need to get a lot more sophisticated and along the learning curve than what they are right now. But, that's natural considering the recent development in the Bakken.
Mr. McCann, there is a well drilled by Oasis that the wellhead is in section 22 but the wellbore goes west into section 21 so you already have a well, the Kjorstad 5300 24-22 H, 109,565 barrels of oil in 14 months, a very respectable well. I would think they could offer more money as the well still produced almost 4900 barrels of oil last december which is the last month I have production information for. Your two sections are in two different well spacings, I wouldn't lease them together. If I had your acres they couldn't lease them from me for what they are offering you. Remember that the first offer usually isn't all they are willing to pay. Good luck with your negotiations.
Mr. Kennedy, Many thanks for the information regarding the Kjorstad 5300. I'm familiar with leasing in OK and TX, but not so in N.D. Are you saying to not lease in section 21since there is a producing well? My understanding is any non-percipient is entailed to 1/6 th royalty after 100% production covers the total well costs? I’ve heard if you get pooled, that means you have a working interest if you don’t have a lease. I haven't seen any division orders or JOA’s on the Kjorstad 5300, but production probably has not covered the drilling cost thus far. Sorry I’m so naïve about leasing in N.D., but Oklahoma pooling almost always benefits the operator. Sincerely yours, Jim
r w kennedy said:
Mr. McCann, there is a well drilled by Oasis that the wellhead is in section 22 but the wellbore goes west into section 21 so you already have a well, the Kjorstad 5300 24-22 H, 109,565 barrels of oil in 14 months, a very respectable well. I would think they could offer more money as the well still produced almost 4900 barrels of oil last december which is the last month I have production information for. Your two sections are in two different well spacings, I wouldn't lease them together. If I had your acres they couldn't lease them from me for what they are offering you. Remember that the first offer usually isn't all they are willing to pay. Good luck with your negotiations.
Dear Mark, Many thanks for your time to explain force pooling advantages in N.D. Do you know if N.D leases could have a "favor nation clause”? I've had these clauses in my leases in Oklahoma when I thought maybe it was a bad operator or did not have all my facts before signing the lease. I'm still fairly naive in N.D, but these boards have been great resource for a newbie like me to the Bakken. I'm a member of NARO, but their forums have been pretty silent over the years. I'm still active in NARO and attended their conventions whenever I can. They are a great resource for mineral owners that need guidance like myself. Regards, Jim
Mark Skipper said:
I'm not familiar enough with terms in that area of North Dakota to know if it is good or not. I do know the forced pooling law apparently is extremely, extremely advantageous for unleased mineral owners included in a unit. I would think the decision to lease or participate is like many people on this site state, how good is the production in the wells offsetting your acreage. I think there is little doubt that operators like Brigham are drilling wells with a very significant interest in holding acreage as HBP to prevent lease expirations. That is true in shale gas plays. Operators are paying a lot of money for leases, and they want to avoid the risk of expiration and/or the cost of renewals, so it looks to me like they are drilling wells that may be less than ideally economic for no other reason than to hold expiring acreage. That may be the case here. I'm all for mineral owners not leasing if they can afford it. If they need the hard dollars, maybe they should take the lease, but not leasing certainly holds much higher upside than as a royalty owner under a lease. I'm also waiting for royalties to get beyond 1/5th (20%). In some areas of the Bakken they are certainly well justified, where in many areas they probably are not. Operators are stuck in the position of not wanting non-operated working interest owners who are unleased mineral owners. I know they hate that, but I'm sure they don't want to set a precedent for paying 25+% in royalties. Sorry I don't have a better answer for you. I will say that's a lot of money per acre from what I've seen elsewhere on this site. I looked at the production in your township and range, and it doesn't look like there's that many good wells. This tends to confirm my belief that operators are targeting the holding of as much acreage as possible by drilling as few wells as is needed. If I was a mineral owner, I don't think I'd help them with that. Finally, ND mineral owners need to get a lot more sophisticated and along the learning curve than what they are right now. But, that's natural considering the recent development in the Bakken.
A typical printed form like the ones so widely used in North Dakota, at least the ones that I've seen, never, ever have a favored nations clause, certainly not in forms offered by oil company lessees. I'm sure you can understand why.
Jim McCann said:
Dear Mark, Many thanks for your time to explain force pooling advantages in N.D. Do you know if N.D leases could have a "favor nation clause”? I've had these clauses in my leases in Oklahoma when I thought maybe it was a bad operator or did not have all my facts before signing the lease. I'm still fairly naive in N.D, but these boards have been great resource for a newbie like me to the Bakken. I'm a member of NARO, but their forums have been pretty silent over the years. I'm still active in NARO and attended their conventions whenever I can. They are a great resource for mineral owners that need guidance like myself. Regards, Jim
Mark Skipper said:
I'm not familiar enough with terms in that area of North Dakota to know if it is good or not. I do know the forced pooling law apparently is extremely, extremely advantageous for unleased mineral owners included in a unit. I would think the decision to lease or participate is like many people on this site state, how good is the production in the wells offsetting your acreage. I think there is little doubt that operators like Brigham are drilling wells with a very significant interest in holding acreage as HBP to prevent lease expirations. That is true in shale gas plays. Operators are paying a lot of money for leases, and they want to avoid the risk of expiration and/or the cost of renewals, so it looks to me like they are drilling wells that may be less than ideally economic for no other reason than to hold expiring acreage. That may be the case here. I'm all for mineral owners not leasing if they can afford it. If they need the hard dollars, maybe they should take the lease, but not leasing certainly holds much higher upside than as a royalty owner under a lease. I'm also waiting for royalties to get beyond 1/5th (20%). In some areas of the Bakken they are certainly well justified, where in many areas they probably are not. Operators are stuck in the position of not wanting non-operated working interest owners who are unleased mineral owners. I know they hate that, but I'm sure they don't want to set a precedent for paying 25+% in royalties. Sorry I don't have a better answer for you. I will say that's a lot of money per acre from what I've seen elsewhere on this site. I looked at the production in your township and range, and it doesn't look like there's that many good wells. This tends to confirm my belief that operators are targeting the holding of as much acreage as possible by drilling as few wells as is needed. If I was a mineral owner, I don't think I'd help them with that. Finally, ND mineral owners need to get a lot more sophisticated and along the learning curve than what they are right now. But, that's natural considering the recent development in the Bakken.
Mr. McCann, I would consider being a carried interest if you could not afford to participate. Depending on well cost, that well probably isn't that far from being paid off, and is still producing a goodly amount of oil. If you were a force pooled carried interest, you would get the weighted average of whatever everyone else in the spacing leased for or 16% ROYALTY FROM THE VERY FIRST BARREL, lately you could just say 16%, which is very close to 1/6th [16.67]. The other 84% goes to pay for your drilling costs, penalty of 50% of actual drilling costs, and dollar for dollar expense of operating and equipment costs. It would be a shame to have to go carried instead of participate when it's this close, being carried it would probably take another year to year and a half allowing for declining production to pay off your costs and penalty, which would still be worthwhile to me, and you still get the 16% until it gets to that point. I think the other options would be to try to negotiate a lease where the operator would scream that it was unheard of, but unless they want the amount they can make off of your acres capped to 50% of actual drilling cost, they had better start listening hard. The operator didn't pay you up front and assume all risk in leasing you, there is no reason I can see why the operator should now get the same deal as they would have gotten had they put cash in your pocket up front, if the well was dry, do you think they would want to lease you ? Heck no! You have already shared the risks, you just haven't paid your up front money yet, nor have they asked for your share yet, and they will not until you refuse to lease, they have to offer you a chance to participate before they can petition for the risk penalty. The Brigham lease offer is the hail mary pass to make a killing off your acres. I think you could do considerably better any number of ways, including a lease offer, but they didn't frontload the money so they shouldn't expect to make as much off the back end of the deal. It will be your job to make them understand this, with participation [ worst for them] or carried [ still not good for them] or making you a really good lease offer, which would be their best option. Sell them on the idea. Nobody has to know what % royalty you held them up for, that's what memorandums of lease are for. Be firm whatever you decide.
Jim McCann said:
Mr. Kennedy, Many thanks for the information regarding the Kjorstad 5300. I'm familiar with leasing in OK and TX, but not so in N.D. Are you saying to not lease in section 21since there is a producing well? My understanding is any non-percipient is entailed to 1/6 th royalty after 100% production covers the total well costs? I’ve heard if you get pooled, that means you have a working interest if you don’t have a lease. I haven't seen any division orders or JOA’s on the Kjorstad 5300, but production probably has not covered the drilling cost thus far. Sorry I’m so naïve about leasing in N.D., but Oklahoma pooling almost always benefits the operator. Sincerely yours, Jim
r w kennedy said:
Mr. McCann, there is a well drilled by Oasis that the wellhead is in section 22 but the wellbore goes west into section 21 so you already have a well, the Kjorstad 5300 24-22 H, 109,565 barrels of oil in 14 months, a very respectable well. I would think they could offer more money as the well still produced almost 4900 barrels of oil last december which is the last month I have production information for. Your two sections are in two different well spacings, I wouldn't lease them together. If I had your acres they couldn't lease them from me for what they are offering you. Remember that the first offer usually isn't all they are willing to pay. Good luck with your negotiations.
Does anyone have any information regarding Township 159 Range 100 near section 29 or 33? I would be interested in learning who is leasing that area and what they may be offering. I currently am in negotiations and would like to be informed enough to make the correct decisions. I will keep you informed of the final results. I appreciate Mr. Spears input, it helps us all get an idea of what is happening around us.
YES, do use an attorney for all lease documents and copies of drafts and checks. My attorney pointed out language on a draft that needed to be addressed. David Hermanson in Williston is who I have been using for years. I would highly recommend him.
I know that Marathon Oil, Oasis, and G-3 Operating has holdings in the 157N;R103 area but your mineral description is just north of this area. These operators could also be in that area but not for sure.
Suzanne Vohs said:
Does anyone have any information regarding Township 159 Range 100 near section 29 or 33? I would be interested in learning who is leasing that area and what they may be offering. I currently am in negotiations and would like to be informed enough to make the correct decisions. I will keep you informed of the final results. I appreciate Mr. Spears input, it helps us all get an idea of what is happening around us.
YES, do use an attorney for all lease documents and copies of drafts and checks. My attorney pointed out language on a draft that needed to be addressed. David Hermanson in Williston is who I have been using for years. I would highly recommend him.
The GIS map shows 4 wells being drilled right now within within 5 - 7 miles and more permits around you but none in your spacings. At least you will have some idea of how good the wells in your area will be in a year or so.
Suzanne Vohs said:
Does anyone have any information regarding Township 159 Range 100 near section 29 or 33? I would be interested in learning who is leasing that area and what they may be offering. I currently am in negotiations and would like to be informed enough to make the correct decisions. I will keep you informed of the final results. I appreciate Mr. Spears input, it helps us all get an idea of what is happening around us.
YES, do use an attorney for all lease documents and copies of drafts and checks. My attorney pointed out language on a draft that needed to be addressed. David Hermanson in Williston is who I have been using for years. I would highly recommend him.