R W - I must have been working on my post when you posted but we arrived at similar numbers.
Virgini, “…to deliver to the lessor free of cost in the pipeline…etc” … lessor, of course being the poor, debt ridden, poverty stricken, down and out, gullible and ignorant mineral rights owner. Whose favor is that line?
I would say that line is in the operators favor because the courts now say that free of cost means that you don’t have to pay for the well out of your royalty. You have to love our paid for judges, why would anyone lease if you had to pay for the well anyway?
Virginia Yes, I am sure the 900000 figure was to lure investment money in, but it sounds good. The more money they make, the more money the mineral owner gets. I’m assuming from your answer the 900000 was a years production. On the SE 1/4 of sec. 20 there were 2 shallow stripper wells for years that we received a check from Bobby Darnell, not SE, NE. Very small checks, so it won’t take a very good well to beat what we had.
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So the 900,000 guestimate is from the Mississippian only, and did not address the Woodford? I can only imagine that while the Oil Companies and their reps think nothing of lying to and cheating we Mineral owners, that it is not very nice of them to lie to and cheat their investors? Is there still not honor among thieves? I still say, after tons of research, Osage and Slawson are about as honorable as they come. Anyone who also owns Jamba Juice Smoothies Stores has got to be okay with me.
900,000? That won’t even buy my kids shoelaces unless it is on long term credit. Well, back to writing the book…LOL
Wish Osage was drilling on my land if they are planning on hitting that big of a well. One thing that needs to be pointed out on these figures. If you signed a lease and you didn’t mark out “cost”, like transportation, etc. usually found in the second paragraph. Your checks won’t be as big. So, if you sign an oil company lease, just mark out that part. I know it cost a lot of money to drill and produce these wells, but remember you are only getting a small part of it.
Cathy’s other half again, I’ve slept on it and have some more questions. Thanks everybody for all of the good information. Yes, Osage’s 900,000 would certainly be a good well. But nowhere have I seen how long it’s going to take to pump that much oil. Is this a day, a week, a month, year, or the life of the well? How long is that, 10 years, 20, 30? And yes, everybody, hang onto your mineral rights, they are just like realestate, they don’t make it anymore.
Cathy other half,
First the Osage 900,000 was for an investor prospective and may never become that kind of a field. I have seen little oil sales in the area that will prove that kind of a well. But, I haven’t seen all the purchaser reports in the area.
How long will that last? Who knows. Usually the first year will be the best, and then it drops off at different rates. Some wells stays pretty good for 10 years and then make a big drop, others drop off sooner but keep stripping for years.
So once you get the big well, invest the first couple years money and then live off the interests, you will be happier longer at least.
My opinion, I think, is that if the figure Osage gave investors is 900,000 (Lets say 1 million for simplicities sake,) over the life of the well, say it is 25 years, that according to my top of the head math, only comes out to roughly 4 million dollars per year. and this would not impress me as a potential investor. On the other hand, if it is over the 3 year life of the initial lease, I might consider cashing in some of my Facebook stock to get in. That is a real tough one.
It might be an estimate from 6 Mississippian and 6 Woodford combined, they might have included some Cleveland wells also.
Ronald,
You must not understand how investing goes. I do not know anyone who would drill a well by themselves. So, lets say that the well cost is about 3 million, then each person figure out what they are willing to put in and they get a % of the profit by what % they put in. Now if they drill and don’t hit anything, you may have just lost your money If you are lucky, after all expenses are paid and operating cost, them you may get a few thousand back. Operating cost on these wells are very expensive, so the profit isn’t that great. But, unless you have $50,000 or more in face book stock and don’t need the money in the future, then don’t sell. This isn’t for the little guy. I think I am right on this, Warren Buffet put a few million into wells in Kingfisher Co. Last I hears, he still hasn’t recovery his money. Maybe someone can check to be sure I am right on this. No one is lying to investors, they just make it sound good, then it’s the investors who need to check it out. It’s like when you buy a new car, all brands have the very best and make the most gas mpg. I haven’t purchases a car yet that made that kind of mileages. Maybe it because I don’t buy cars.
My problem is I never have cash when I see an opportunity. I wanted to buy gold in 1977 at 183 an ounce. I wanted just last year to buy AUS at 0.73 to the US $ and I would have deposited them in CD’s in Australia 30 day term deposits with a yield of about 5%. I did recognise that I had some good acres in ND and I didn’t have to lease so I didn’t. That’s about the only thing I have ever spotted that I got to cash in on because I didn’t need to be liquid for that.
Catherine,
I wasn’t at the investor meeting, so I’m not sure where this 900000 figure came from, but I would assume it was the life of the well, not in one year. I’m sure someone on here knows how the companies put together these investor prospective. I know they have Petroleum Engineers, geologist, lots of records and a really good team to write the reports up. At this point, I haven’t found that any of the investments are as good as they sound. I’m sure lots of people on here have done real well, lots lost their shirt. Todays, companies have lots more records than they did years ago, but they still don’t know everything about what is down there. Only after they drill and get the well tested do they have a better idea.
Ronald,
I think R W answered your question. But, if you didn’t mark things out of your lease, you may still have to pay for transportation of your oil/gas. And if you leased to Chesapeake, they don’t care what you marked out. They will still charge you whatever they think they can get by with. Wonder why they are always in court?
I believe those per section figures are an estimated recovery rate on 6 wells per section not one well and it is still undetermined if it is economically feasible to drill and produce at today’s cost and prices.
From some of the comments I have read, there seems to be some confusion about the length of a lease and the potential recoverable oil of 900,000 barrels in the Osage investor presentation. I was the one that posted the link to the Osage presentation that many have been posting about.
First, the lease term (3 years, etc) in an oil and gas lease is the length of time the lessee has to drill for minerals. The lessor receives bonus consideration of $X per net mineral acre. This only gives the lessee the right to drill but they do not have to drill. If they do not drill, after the term of the lease expires, the lessor can lease the minerals again. If a well is drilled, the lease will continue so long as the well produces oil and/or gas with the only compensation to the lessor being the royalty specified in the lease which customarily in OK has been 3/16th.
Another thing about oil leases is that sometimes they can lease only oil from a specific prospect or they could have no restriction on production which is generally the case today. I have leases I signed in the 1970’s that were for only a specific prospect but all I have signed recently have not stated a specific prospect.
Back to the Osage presentation, the 900,000 barrels of recoverable oil is for the life of the wells in a section. Nearly all of the wells being drilled in Logan County are horizontal wells with the spacing being 640 acres. It takes several horizontal laterals to recover all of the oil within a section.
The 900,000 barrels is relating to the recoverable oil in the ENTIRE section, which will require 3 or 4 Mississippian wells to unlock.
Yes Virginia. One shoul draw back to reality. The test well at 29,17n,3w used in the Osage presentation shows an initial production of about 850 barrels of oil equivalent oran so per day with no info as to decline. On page 15-16 the typical Mississippian well is 275 bpd with 63 percent decline.
I understand and agree to the 3 year deal, but keeping it in force by paying an additional fee of $1.00 per added year seems just a tad bit more political in nature that our Honorable judges have caved in to than any other thing. Our present day news includes church and clergy leaders who are involved in all manner of slime, lawyers advertising on
TV to SUE THE B…'s, medical people advitisers who advertise on T
V for their legal drugs than carry all kinds of warnings, WE ARE A MESS and we see wells all over the world pumping and/or leaking unbelievable amounts while here it home it is a measly 4-500 bpd, while sitting on some of the most potential amounts on the planet. And when it is all said and done, the LANDOWNERS have to clean up the mess done to their property, and the Mineral owners have to just go on to more wishful thinking.
Ronald,
I think you are miss reading your lease. First the 3 years is for the oil company to drill. The one dollar is for shut in clause only. So if the well doesn’t have cross country pipelines or any reason can’t be hooked up, then that clause is used. I haven’t seen a well being held by the shut in clause for years.
plus the shut in clauses is only for a limited time like 1 year and 2 years at the most depending on OCC ruling at that time. A few years back, oil and gas was very low priced and OCC gave the oil companies 2 years to use this clause.