If you are the mineral owner, you would want a depth clause in your lease. Now look at it another way. If they hit a good Miss and you were the producer, wouldn’t you want to stop there? Or would you take a chance to go deeper and get into water that takes the well?
Here is what I am trying to say. Lets say the oil company drills to the Miss and hits a good well. They stop and produce it for several years. Now they find another sand (only using sand to express a level) that is below the Miss, but you have a depth clauses. They come to you and some people would want another $800 per A. The company goes away, so you got nothing. Now here is my deal. You sign a lease and you put 100 ft below the producing sand with another clauses stating if the company wants to go deeper, you will receive 20 to 25% R I of any production below that depth. That way, the company knows they can drill deeper and what they will be paying upfront. If the sand looks good, they will be willing to give you that much and will drill further.
I have seen good wells be taken with water, other didn’t get drilled because the mineral owner want an arm and leg. I look at things on both sides of the fence. Oil company make good money, their investor can make some money and if the mineral owner understand what they need to put in a lease, they can come out O K. I have a 5 page lease, so it has a lots of things in it. Since I am the surfaces owner on some of my mineral, I have clauses in it. Most oil companies don’t like my lease, so if they want me to sign theirs, I will look at it, start marking things out, add 2 to 3 pages. If they want to lease my minerals that is O. K, otherwise, I will wait for the next company to come along. Usually it doesn’t take long if the area is being drilled to get a good lease.
Yes, 6 months, as I recall Osage had requested an exception to “…over 6 months for the drilling of the initial well…” But apparently it was not allowed? If this is true, it is kinda refreshing that the operators do not get everything they want. LOL Or maybe I am mis-reading it? And, that brings up a “…One more thing…” is there anything significant to the reference to " the Initial well?" Initial, to me implies “the first well…” and if there is a first well, is there planned a second well, etc? etc?
I guess I shouldn’t say I don’t use depth clauses, but my clauses are wrote a little different. Lets say they drilled a well on the lease and hit the Miss at 5600 ft and it looks like a good producer, small company has the lease. Now my lease says they can only go another 100 feet if they stop and start producing that sand. Down the road a mile, someone does a test well and hits a really good well in the Sylvan at 6500 ft. Now unless my company wants to pay me for another lease, they won’t go down to get another sand. So, there are some good things about a depth clause and some bad things. If the company is a big company, they will probably go ahead and pay another bonus and drill depth later on, but not at the beginning. Again, lots depends on the location, has their been lots of good test wells in the area, etc. That is one reason people need to research the area around them and know what sands are producing and what hasn’t.
Virginia, I have a couple questions, which I will ask and give some observations on, but they are not rhetorical questions.
I think lessees want all depths from the heavens to the hells in the first lease because they hope to stick it to the mineral owner. If the lessee treated the mineral owner fairly so that the earnings for mineral owner and lessee were not horribly disproportionate, why wouldn’t the mineral owner be amenable to a really reasonable lease for another formation so both could make even more money? I’m not talking the world here just 20% to 25% royalty. I think this is a reasonable supposition but I would like your take.
I think the lessees want to make a killing on every deal. To offer a reasonable lease from the outset would be to give up the CHANCE of making a killing on every deal. If you are going to stick it to the mineral owner, you need to tie down as much, as many formations as possible, because if they ever find out how poor the deal was, it’s going to be a heck of alot harder to do business with them later. Does this sound like it fits the reality?
Because I think the foregoing questions and observations are a reasonable depiction of how things actually are, the very few mineral owners who have gone to the trouble to learn something about their oil and gas lease need to try to limit the lessee as much as humanly possible just so they can break even. And we can all pity those who learned what kind of deal they made only after the fact.
Harley, I understand. I hope you had your leases reveiwed by a competent professional, hopefully a lawyer. If not, it can’t be undone now except by time, as in the leases expiring with no drilling, which alot of them do. I know it’s tough to search specific information on operators, because most people with a problem don’t want to announce who it is with for fear of it getting back to the lessee and making problems worse. I notice you haven’t mentioned who your leases are with recently and I am not digging to find out who it is. The thing is that decisions are made at the corporate level and you need to know who you are dealing with. You need to know their general reputation. You can’t do anything about any gotchas in your lease. I recommend that you just search the lesse/operators name if you want to know who you are dealing with. I would also remember that people will wait in line to tell you what went wrong while those who never noticed any trouble will not bother to say anything about it. Discount any cheerleaders by 90% because they are probably planted.
If you want to find out what companies are doing, sign up for Woods Co. You will find a lot of farmers/mineral owners really upset. These wells are coming in great. But, the farmers are spending a lot of time in court. And these are some of the good companies.
I couldn’t have said it better. You are right when “you have to watch them like a hawk”.
I am sorry that you had such a bad deal happen to you. I have had several similar dealing with oil companies. Oil companies think they are God. When I get a really bad lease upfront, I know the company isn’t any good, so I just say, not interested. I have lost a few bad deals, but have made a few good deals. My attorney loves all my business and I seem to keep him in business, so I do understand. I’m not for oil company at all as I have seen them take advantage of the mineral owners to many times. That is why I keep hoping for a better lease all the time. Each time I lease, I add at lease 3 to 4 more clauses. I guess after reading wind turbine clauses I got educated real fast as to how bad companies can be. I’m just trying to point out how some clauses can keep a person from getting more production. One of the biggest things I have seen lately is companies trying to hold on to non paying wells while they are trying to sell the lease to other companies. They want to make the profit instead of the mineral owner. In oil business you don’t have to look under rocks for crocks, then are setting on top of the rock.
Some of us are new to this game. Perhaps you could identify or describe the instances in Logan County in the past two years of companies that have harmed you specifically and personally. It might help those of us with less vast holdings, interests and personal lawyers. Thanks. I really would like to know the companies so that I might avoid them. I think Devon, Osage, Slawson, Stephens, Husky are ones that come to mind off hand. Are these some of the scoundrels?
Devon likes to partner up with other companies, so they may be good or bad. Chesapeake run like mad as they don’t get much worst. Continental may be O.K. but very slow payers and don’t like to release your lease once it expires. Crown is a smaller company working the N Logan area, haven’t dealt with them, but have heard good things so far.
Limestone is also working N Logan and S. Garfield, so far good.
Hope this helps. When you sign a lease, you are usually working with a land man and you won’t know for sure who it will go to. So, be careful.
Get a really good OIL & Gas attorney, local attorney’s are great people, but they don’t deal with this daily. Even the largest O & G attorney’s can overlook things.
Sorry guys. Perhaps my issue is too personal. I have leases! They are what they are. Anybody in the large part of Logan County that does not have a lease either hasn’t been opening their mail or something is haywire. Sooo, to listen to you guys one would think "Nuts. I better go find a bankruptcy attorney pronto because some jerk oil company is going to steal every dime I have. Well, at least nobody has a permit to drill as of this point in time.
Harley, you are safe at third base, is my opinion. It is my opinion that Logan County is much of a TEST for not only Osage and Slawson, but also for Devon, who is also doing great things in Payne. What we should do, I think, is remember that the Cushing Extension has been built all the way from Cushing to Port Arthur TX and to the refineries in Houston. It is almost ready, and Obama is still not allowing the Canadian Extension of the Keystone, and even if he does, the environmentalists will keep it tied up for years in court. It is not going to happen any time soon, and so it is up to North Central Oklahoma to fill up the Cushing Extension with the sweetest crude on the planet. They KNOW what they are doing, and the wells are going to be more productive, though over a shorter period of time maybe? Technology and time are both on our sides.
Where are you getting these figures? I haven’t seen a well oil purchaser records for 60,000 Barrels from one well in Logan Co for a long time. Guess I am looking at the wrong purchaser records, Also, these H wells are more that $3 million plus to drill. So, if the well would stand up to 150 BBD, after they give the mineral owner his 3/16, that would be less than 2 million per year. That is if the operating was free. So, I’m not sure that these wells will pay for themselves in 3 years and that is what investor like. Now look at investor side. They used to only have to have 1/2 million assets, now it’s more like 5 million in assets before you can invest in drilling a well. I think they may have hit a few good wells in Logan Co, but sure a lot that aren’t standing up. Since I don’t know what part of Logan Co that your minerals are in I can’t say you didn’t get very much for your lease. But, in North Logan Co people were getting $500 plus per A. Now that some of the leases are expiring, they aren’t extending the leases. Yet they have some of these 100 + wells in that area. As far as OCC court dockets go, most company are on the docket with something each week. And by the way, these are lawyers that go before the OCC docket. I sure hope your father won’t mind if his minerals get spaced by one of those lawyers.
I will never say that everyone need a attorney, but I sure do need one. I have a good one and I know what to ask for and he does a good job for me. Lots of other people never need a attorney and get through life just fine. Wait till they come in and make a 5 A pad, put 12 inches of rock down, leave you with a pit full of mud and they are gone. Then we will talk with you. We are lucky now that we have OBER. I wish you the every best and hope you get a good well.
I know their are a lot of spacing going on south of 51 and west of 77. I hope they hit some good wells and that they last.
I just got a report in the mail today that they are closing another well down in Woods Co that had been making hundred of barrels a day. Production went down to 1 barrel in less than 1 year. If I remember reading my report right. When they frack Horizontal wells they can only go about 1/8 of a mile total or about 1/16 each way. I may be wrong on this, but that is what information I have. Does anyone know for sure?
Does anyone know why these wells aren’t standing up to time? Are they pumping them to fast, not getting a good frack or what?
You are right about it costing more than you can make on a lease. I leased 320 A to one small company. They seemed O K at first, then they sold it for a profit I’m sure. The 2nd company came in and would only produce the wells a week each month. I couldn’t figure it out at first. I later found out they didn’t want to pay the pumper. Then they would take oil from one well to the other and only pump one well at a time. Still wasn’t sure what has happening. About 8 months later, they sold me out to water flood pooling. Luck it was only 40 acres they needed for the water flood. So, I took them to court and got everything else back. It was costly, but I hate being took. Lots of these wells will be pumping for 40 to 50 years and even with the best lease, things changes and you can still get took.
Right now, at my home in TX, we have 2 wells with Chesapeake and they are one of the worst companies. We signed a lease for 24%, to date, I still haven’t got a good answer why I have 3 different decimal points on my check. They said a foreign company bought it and are selling their own gas. But, my lease says I don’t pay for anything. just not a big enough acreages to mess with. Our HOA and several of the retired attorney’s are looking into it. So I’m on this big time. We even have a couple of oil company executives working with us. Boy am I learning how these executives think, I thought I knew a little bit, not anymore. One Attorney from San Antonio has taken Chesapeake to court, but it got thrown out in Oklahoma. I’m sure the judge got paid off. If a person only has a few acres, they will take you big time and you don’t have enough to do anything with. But, if you own a lot, they aren’t as likely if they need your acres for the pooling. I had a neighbor and we stood together since we had over 2500A together. We finely got what we wanted, they drilled and got a good well, now they are on #2 well.
Right now I have a bunch of Las Vegas people putting a cloud on my mineral title, Now they want me to buy then out, no way, so to court I will go. It’s becoming a full time job just taking care of a person minerals nowadays.
I could write a book on how to get took by an oil company, but their are 100 of them already out there.
Harley, you may take into consideration how many pages Virginias lease may be, it’s possible that they never had a chance to harm her. I trust none of them as far as I could throw a rig, with one hand. I think you are not asking the right people, certainly not the right timeframe.
If you asked raw new people who have had trouble in the last ten years, you might get an idea of what I think you are looking for. I also would suggest that you not stop at the county line, or even the state line, operators don’t think county lines are special and being in Logan county would not provide you additional protection that I know of.
I don’t remember why I came to the conclusion, but I remember, after much research, that I commented that Slawson of Wichita was a company obviously with very high integrity, and so my reasoning was, at the time, that Osage was also pretty good, who are located in San Diego and Bogata, Columbia. I have a beautiful Spanish Professor at VCU in Richmond VA, who wrote the most beautiful poem I have ever heard about out national tragedy at the WTC, so I say who is from Bogota, I produced a wonderful Ebook of her poetry with her reciting. That influenced my opinion of Osage. Pure logic in the direction few follow, but I believe in these things. Osage and Slawson, I would trust them at the top. No question, especially after my research into their activities.
Thanks. Actually TS Dudley handled the lease for Devon. Osage Exploration was on OCC Court Docket last week for spacing and pooling of the Section in Logan County. My Dad would rather be forced to go to church seven days a week than trust a lawyer.
The good news is that after the well casing caved, the property has been leased continuously since the mid 80’s. $25 per acre, then $50 and then along came Osage last year with $125. My cousins own the remainder of an 80 acre portion and one works for Devon. Thus the lease to Devon for $175.
We were ready to sell in January. Then I started the research. My, My look at what is happening! Devon is very busy and Osage Exploration/Slawson are trying to get busy. They just need funding.
The horizontals that Devon has produced in Logan County seem to be one year miracles. The pressure from the fracking works but it dwindles to almost nothing in 12 months.
I could be off base, but that is why they are permitting multiple wells from the same Pad up in Logan 19N3w. The fracking is effective but very limited. I think they may be using the same well casing for multiple horizontals. What do I know!