Martha, thanks for response. How does one go about calculating the value of their minerals?
Martha,
I did not hear of any recent changes of opinion as to clauses in Oklahoma. There was quite a bit going on pertaining to the local Utica and Marcellus plays. Still something for everyone, I just did not hear much to change opinion on Oklahoma leases. It was a great conference in a nice facility.
I’d start by trying to negotiate terms with clauses for Depth, Pugh, no production costs, shut-in limit to 2 years concurrent or 3 years accumulative. No primary term option, strike top lease, limit Mother Hubbard, strike or limit the warranty. If possible negotiate the formations bound by the lease. Basically an upper and lower limit, only the formations they intend to explore/develop, and/or a release of everything not independently tested and proven capable of economic production after 2-3 years on the expiration of the primary term.
All of the above is not too excessive and should be easily negotiated with the exception of the extensive depth clauses. The traditional will be much more easily accepted.
Ronald Von Wilson, I respectfully disagree and so does The Texas Land & Mineral Owners Association. http://www.tlma.org/
Dwolfe, Minerals which are under production and producing monthly revenue are going to have substantially more value than non producing minerals. Selling your minerals right now would mean you are selling “blind” as in you are selling without knowing what your producing minerals are worth, because you don’t have any production records. Honestly, most mineral owners who know how to correctly calculate the value their minerals do not sell their mineral rights.
Debbie Wright, Here is Blanchard case: Shell Oil Co. v. Corporation Commission, 389 P.2d 951 (Okl.), a case referred to as the “Blanchard Case.”
Rick Howell, I’m in TX and knee deep in work, so could not attend NARO meeting. Could you please tell me what lease clauses NARO is suggesting for Oil and Gas Mineral Owners to use? I have 40 acres that are not leased or pooled in Payne Co. which several companies want to lease, so it is very important for my lease clauses to be legally current. Thank you for your help.
Martha, and others, I do not realy think that “using our lack of knowledge against us,” is the proper phrasing. Rather, these attornies are using what they know about the law in regards to thes matters in favor of their clients is more appropriate. The mere fact that mineral owners may even be harmed in ways, however slight, is not so important as doing what is right for their own clients. The law is the law, good, bad, or indifferent, and it is never intended to help everyone, just as manu as it can.
Here’s some info on Miss Lime production time-line in KS, but it’s going to be the same in North/ Central OK as OK is just a little behind the KS Boom. http://www.cnbc.com/id/46993343
Interesting comparison of KS and OK Boom, but it is also interesting that this info is a year and a half old, and the technology and know-how today is much akin to buying a new computer, it is outdated befor you get it out the door. I certainly agree that “we ain’t seen nothin yet,” and proof of this is in the fact that we see new wells at 80, or 350, or 650, but nothing in between. At that point it is all guess work.
Mississippian Lime: Staying Power and Future Development Potential 50 Years
http://www.shaleexperts.com/uploads/media/e73d9a1833b656cce09a195af…
Rick Howell, Thank you so much. I have all the clauses you mentioned and know what to omit except for the clause/s needed to address the negotiations of the formations bound by the lease. Is your wording…, “only the formations they intend to explore/develop, and/or a release of everything not independently tested and proven capable of economic production after 2-3 years on the expiration of the primary term”, part of a defined lease clause?
Here’s some info on de-watering the Miss Lime. http://www.evolutionpetroleum.com/mississippi-lime.html
Is there anyway to find out if there are other producing wells in the area and what the yield is? My concern is that there were a lot of names on the pooling order. So, I assume that if there is production and if it is sizable, the proceeds will be divided accordingly. I am just in the how can I gather more information mode? I have considered getting the assistance of a lawyer. But, again, I can pay for all kinds of expertise, not sell the rights, and end up spending more than is returned.
Dwolfe, You will need to find an independent geologist who is highly familiar with the mineral formations where your specific mineral acreage is located (legal description). This geologist will need access to 3D seismic survey of your legal description section and surrounding sections. After your geologist completes his geological survey he will need to consult with an independent reservoir engineer who is highly trained in the shale formation reservoirs of your minerals legal description. Next you will need to an economist to help you understand the future fluctuations of oil and gas prices over the calculated life of your well or wells. Also, a financial advisor will need to help you understand how to invest the money from the sell of your minerals into other investments in order to continue a revenue stream. Finally, an accountant who is trained in oil and gas accounting will need to explain the tax consequences or selling such a valuable asset. The above sounds very complicated and it is, however selling without this information means you are just guessing a what your minerals are worth. Look at it this way: If someone wants to buy your minerals you need to tell them what you minerals are worth and the amount of money you must have in order to sell. Don’t do it the other way around where someone tells you what they are worth and what they will pay you.
Martha,
You are so right on this. But, most people won’t spent a penny to see what they have.
So people get richer buying these people minerals for a thousand or so. Lots of wells in this area are coming in at 40 bbd and others are almost 500 bbd. But, people want there money today and will sell. Plus lots of people won’t spent a penny on a good attorney and sign there life away all the time. I think that is what makes fools.
Dwolfe, Martha M is correct in that it is quite an effort to correctly calculate what your minerals are worth, but I am attaching a simple spreadsheet where you can do some of your own calculations for a ball park look. Devon is quite active in your area and has a Woodford horizontal well planned. Often they are drilling a Woodford and then a Miss Lime well. They will hold the section with the first well and will come back in and drill multiple wells after that in a couple of years. They have quite a bit of outside money funding them in this area.
You can input your acres in the yellow sections of the spreadsheet and calculate what kind of returns you might see from one well, two wells, six wells, nine wells, different prices, etc. I have acreage with Devon in another county where they are drilling nine wells per block. This is why you are getting the offers to sell.
The bottom part of the spreadsheet shows what your purchase price might be. Plug in what you have been offered and then see what the totals come out to be in one year, two years, three years, four years. This is a long term game. Keep in mind these wells often produce like gangbusters for a year or so, then taper off quickly, but may consistently produce for the next 20-30 years. This play is just heating up and the companies offering to buy want to make a quick profit off of you. Those of us who have acreage and a little experience will probably hang onto ours.
This is what some of the wells in the CANA Woodford look like for declines (gas only in this example-since I didn’t have good oil numbers yet). This is from three different sections. Devon held the sections with one well each for several years. Then last year they drilled 24 more wells-8 on each section. Guess how many offers to sell I had right before those 24 wells were drilled. I sure didn’t sell and won’t sell in the Logan area either. No guarantees for Logan, but this is they type of drilling that is driving the offers. Hope this helps you visualize the potential.
Dwolfe,
It usually takes at least 6 months and up to one year before anything will show up at OCC reports. But, you can call Occ and they can look up the purchaser and see what is sold.
Martha,
I have found that everyone only wants a quick buck for there minerals. The way you suggested would cost at least a few thousand and would be the right way to sell. But it sure going to make it hard for people who buy minerals to laugh all the way to the bank.
Virginia, Back in 2001 a family I know was offered $600,000.00 for all of their Oklahoma mineral rights, but they did not sell. They hired a geologist and today that family’s bonuses and royalty revenues from those same minerals is almost 3 million per yr. for the last 4 years.