Hello,My oil mineral rights lease will be up Sept.29th,with Marathon oil co.They are asking to renew the lease for two more years at $936.Is this the going rate.Or can I ask for more.I signed in at 3/16% can I change that? What should I do? The wells are on confidential list.Does'nt say when the 6 mo.are up.I really need some help.Would appriciate any advice you can give me.Thanks Marcella.
I may be wrong, but my understanding is that if you are under lease and have a producing well then you are already bound to the lease for the life of the producing well. Or are you saying that the 4 wells are nearby (other leases?).
Also, I assume that lease you have with marathon that will expire has no "renewal clause". So there are holes in your situation making it hard to answer.
However, if I guess about your situation and assume that there are 4 confidential wells that are nearby and they are offering to renew, they have positive results. They don't want to lose your lease. but when your lease expires, your minerals are back on the market - anyone can lease them. If that is the scenario, I'd investigate who is Marathon's competition and importantly who holds the land around you. Let's say there is competition around you, well you could have a bidding war. On the other hand, let's say Marathon has everything around you, then it means that they will be the once to lease and they will want your land. How much they pay would be a function of how badly they need the acreage. How much land do you have.
But in conclusion, it would appear you are in the drivers seat, assuming you don't have a renewal clause. So are they notifying you that they want to execute the renewal - or are they talking about executing a new lease.
Interesting.
Wilson
Hello again, Marcella. If I recall correctly, your acres are spread out like mine over different spacings and counties. Possibly not all your acres are held by production if you have seperate leases or a good pugh clause in a single lease. If they need not lease you again and the offer is a mistake, they will probably want the money back. If it's not a mistake I would not lease acres in McKenzie countiy for such a small sum. When we were speaking before you said you had acres in McKenzie county, are these acres on a seperate lease which may have expired or getting close to expiration with no well drilled yet ? Remember that a permit will show up as a confidential well on the GIS server map when there is no well at all. If you can give your McKenzie county acres legal description I can check for you. If your lease is recorded I can read that for you also, if you private message the name on the lease. I would be glad to help you get to the bottom of this.
Wilson;Thank You so much for your help! The wells are in my sections.,I am under lease with Marathon,right now until Sept.29th,Marathon Called last week,and want to renew for two more years.I am and have four producing wells.in Dunn county township 148 -96 w I am bound to lease to the lease for the life of the producing well.But am I bound to stay at 3/16% or can I ask for more?What should I ask for ,As I said they offered to pay $936.to lease for two more years.How can I find out who owns the land around me?In my case maybe not needed.I think I am in the drivers seat.I only have small amt.of land ,but so far I am involed in six wells.I also am part owner in McKinzie county.I noticed there is another oil co.drilling in my sections do I earn any royalties there? Thanks for answering my questions.Marcella
First, I would suggest you do PM (private message) RW since he is experienced and has offered to help you investigate your situation for you.
Wow, involved with 6 wells, we should be asking you questions. Congrats!
You have several questions, but I still don't understand your situation accurately.
1. But am I bound to stay at 3/16% or can I ask for more? What should I ask for
A. If you are talking about a lease that has a producing well then you cannot alter the lease agreement in any way (but if this is the case, they don't have to "renew" the lease either). It would be the legal commitment the life of the well production. However, if you are talking about a lease on minerals that does not have a producing well (or not included in a drill unit that has a producing well) then you would be free to lease with any gas/oil company with whatever terms you can negotiate (assuming the lease doesn't contain an option to extend). You see there are many questions for me to understand your situation clearly.
2. How can I find out who owns the land around me?
A. You will need to spend time at the court house reviewing property ownership records. They will have plat maps, property descriptions and ownership data there. Once you have that you could check with the county recorder to see if these neighbors have leased and to who.
3. I noticed there is another oil co.drilling in my sections do I earn any royalties there?
A: Only if you have a lease with them and are part of the designated drilling unit. However, depending on where they own mineral rights would depend on if they might have interest in leasing your minerals that expire with Marathon in September.
Again, I'd follow-up with RW, he is much more experienced and has minerals/wells in your area (my experience has been limited to MI). Good luck, sounds like you are in a great position, not only with this particular lease/question but with all your wells - very exciting. I hope they are producing wet gas or oil!!!
Wilson
Marcella j.Haman said:
Wilson;Thank You so much for your help! The wells are in my sections.,I am under lease with Marathon,right now until Sept.29th,Marathon Called last week,and want to renew for two more years.I am and have four producing wells.in Dunn county township 148 -96 w I am bound to lease to the lease for the life of the producing well.But am I bound to stay at 3/16% or can I ask for more?What should I ask for ,As I said they offered to pay $936.to lease for two more years.How can I find out who owns the land around me?In my case maybe not needed.I think I am in the drivers seat.I only have small amt.of land ,but so far I am involed in six wells.I also am part owner in McKinzie county.I noticed there is another oil co.drilling in my sections do I earn any royalties there? Thanks for answering my questions.Marcella
Hello,Another question I have is Marathon is horizotal drilling in Dunn county sections 1-12-13 - 24 extends all the way across north and south,Should'nt they be getting alot more bopd then reported? Sounds good,but I share with 500 other mineral rights owners.Only way I may make some money ,if the oil wells produce many barrels a day.I call it a scam,to be able to sell to 500 people in these sections.Thanks Marcella
Marcella, Wilsontownship made an error in his post above, probably becaude ND differs from the rules He is used to. If you have acres in another spacing in which you are leased for or unleased and an operator drills a well and gets production, they owe you money. The two important facts are that you own acres in the spacing and your minerals are being produced, in ND as long as those two things are true you are owed money. I hope you read and understand my post above and have your lease issues sorted out. Marcella, your spacing is a 2560 acre if I can believe the GIS map with 2 fair wells, you are just splitting the money amoung twice as many acres, so yes it's going to look low. When the experts say you have a small piece of a bigger pie, this is what it means, less money until and unless they ever drill more wells for you. It's bullstuff! Do not hold your breath waiting for the wells to follow, but you can hold your nose while you consider why the state would let them do this to you, because it stinks.
W Kennedy,Do I need to hire a lawyer ? Marathon is drilling four more wells in my sections 13 ,Deep creek Lost Bridge township 148 range 96 W confidential list # 21837 #21838#21839 #21840 This is in the same spacing as the other two wells.In my sections in McKinzie county township 149 north range 95 w sections 33 s2 -34 s2 -35 ne , s2 another oil co.is drilling ,and are on confidential list.Is this what you were referring to,when you said Wilson made a mistake.Rules in N.D.differ .That they will owe me money. Hope fully I can get a decent price for renewing my lease with Marathon.Thank You so much for your Reply,Marcella
Marcella, if they get production and you have good title, as good as that for which you are already being paid for, you should not need a lawyer. There is nothing for a lawyer to challenge at the moment so his time and fee would be wasted , unless you just wanted his opinion. Helis has definitely drilled a well in 149 - 95 -33 which comes off confidential 8-16-2012, they are in the process of drilling a well in 149 - 95 - 35 which comes off confidential 10-3-2012, 149 - 95 - 34 has a very nice well [ 42,479 barrels in a month and a half as of march ] that has the head in section 27 but the wellbore is also draining section 34, this is your well. It appears that Enerplus has or intends to drill a salt water disposal well in section 34, which is probably not a money maker for you. These new wells are on 1280 spacing by what the GIS map tells me. The well in spacing 27/34 seems to be a very good one, things may look brighter on the money front soon. Marcella, are you leased in these sections ? If not I think you could negotiate very favorable leases or even be a carried interest as I have done in at least the one well. Helis Oil and Gas co LLC is the operator of all three wells. They have 150 days from first sales of oil to begin paying you or they owe interest, IF you have good title. If you leased these acres to Marathon, Marathon might not have had the majority of acres in the spacings and participated in wells Helis had the right to drill being the majority acreage holder. Marathon would be the primary one to owe you but Helis would probably be cutting checks to you and Marathon. Marathon may have worked a swap with Helis on your acres, but Helis would have had to have something equally good that Marathon wanted or I do not see why they would trade. I didn't intend to write a book, just clear some cloudy areas for you and give some likely possibilities. At the moment I see nothing but good for you but it may take up to 8 months of patience. If it takes much longer than that, then I would have a lawyer pen an inquiry as to why you have not been paid, but only if you don't get a straight answer from Helis yourself. I hope you feel better about things now. Marcella, I will look up your leases if they are recorded and see if I can get to the bottom of the lease offer.
W.Kennedy,I am leased in these McKinzie county,sections along with dunn county,was all done at the same time.Until Sept.29th.2010.I dont know for sure how to lease,the good well.Like you suggested,to negotiate for a good price,whats a good price? I think it will all be done togather.I dont know anything about carried interest .Whats a pugh clause in a single lease.They did send me two forms I had signed by a notary,and they sent two seperate checks at the same time. paid sepertly for Dunn county and McKinzie county. Now the two wells Buffalo and 19667 Elk creek 19666 are off the cofidential list,Township 148 sections 1-12-13-24 but they are drilling four wells on section 13.Thanks Marcella
Marcella, I believe I have gotten to the bottom of this offer, it is not in error. Marcella you are held by production everywhere you have a well, or a well being drilled by the continuing operations clause. Your lease has a pugh clause and your interest in 149 - 95 - 25 has not been drilled, is not even permitted and the primary term of your lease expires in september this year. I would let it. I would say to negotiate a new lease with higher royalty for this spacing. Marcella, just let the lease expire and be sure to notify Marathon that it has expired by certified letter and file an affidavit of no production. Which brings me to your lease. Marcella, in your current lease you are paying for the equipment for conditioning the production for sale, you do not want to do that in your new lease that will cover section 25 alone as you are paying expenses that you do not even get to deduct from your taxes. I would also address the clause [#13] that states that you must give notice of breach or default and give the lessee 90 days to correct before you can take legal action. I find such clauses incredible. The breach could go on for some time before you notice it, being an ordinary mineral owner, but they still have 90 days from the time you serve them with notice to do what they should have done without being prompted [ what they have contracted to do ], before you could sue them. They also threw in that no matter the outcome of the case you agree that they can never lose the lease no matter how bad they act. The most outrageous thing of all is that you have to tell them they are in breach, YOU, have to tell THEM how to run their oil company, as if they were five year olds and didn't have a copy of the lease to tell them what they need to do. It's #13 on your current lease and it needs to disappear in your new lease for the minerals in section 25, you can't fix it where you already have wells but no need to make the same mistake again. Now the money part, this is a good area, I would not accept less than a 20% royalty, with no deductions for anything but taxes that we all must pay. I would ask $4,000 per net acre bonus which I think you could get if you negotiated hard, possibly asking $5,000 per net acre to start. If they would not offer over $3,000 fairly quickly I would just stop talking to them after telling them thay have forced you to seek offers elsewhere. Marcella, after your current lease expires and your pugh clause frees your acres in section 25 you can lease to anyone, Marathon, Helis or 50 other possibilities. Nothing sets market value like competition, the more bidders the better. If I can assist in any way, just let me know. Robert.
Robet,First of all I apprciate,all the work you have done! The information,shakes me up.That the six wells I am part owner in have a pugh clause,and I have to pay all these expenses.I trusted Marathon oil .Acturely I thought this just the process,we have to go through,before we get payed. ! Well to late now.But I thank you for all the research,you have done. So you are saying that I should sue Marathon oil! Asking for what ? To correct breach and Default ?I will let the lease expire,and negotiate hard.Since Marathon,is making me pay for all those expenses,they need to pay 20% royalty and $4,000 to $5,000,per net arce.What about the wells that Helis is drilling? Do I pay for all the expenses there too ? Thanks Marcella
No Marcella, you have no reason [ legally ] to sue them because you agreed to the lease. I was stating what is likely to happen if Marathon / the operator ever breaches the contract. You have to give them written notice and then they have 90 days to fix it before you could sue and if they didn't fix their breach/default and you sued them you could recover money but you would still be tied to the lease with them. If you have an inkling of anything not being done correctly you should give notice in writing immediately because the 90 days doesn't start until you do. If you look at your current lease, it's clause #13. You don't want that in your next lease. You also do not want any deductions other than taxes in the lease when you lease section 25 again. You want higher bonus and royalty in the next lease, it's good acres and you can get better bonus than last time with 20% royalty. You can't fix what happened in the past with the wells already drilled or drilling but you don't have to make the same errors as last time, this time, nor do you have to lease to Marathon at all when section 25 becomes open again in september. Sadly Marcella, those Helis wells are covered by your lease with Marathon and you will only get 3/16 royalty and have to pay all the deductions. In oil and gas you have to be careful who you trust. At least they are good wells Marcella. Robert
Marcella j.Haman said:
Robet,First of all I apprciate,all the work you have done! The information,shakes me up.That the six wells I am part owner in have a pugh clause,and I have to pay all these expenses.I trusted Marathon oil .Acturely I thought this just the process,we have to go through,before we get payed. ! Well to late now.But I thank you for all the research,you have done. So you are saying that I should sue Marathon oil! Asking for what ? To correct breach and Default ?I will let the lease expire,and negotiate hard.Since Marathon,is making me pay for all those expenses,they need to pay 20% royalty and $4,000 to $5,000,per net arce.What about the wells that Helis is drilling? Do I pay for all the expenses there too ? Thanks Marcella
Robert,Thanks again,but how will I know when the expenses will be paid for? Another question; Am I reading this right,that one of the Helis wells is getting 42,479. barrels in a month and half.Another question,What if Marathon gets a permit in section 25 before my lease is up? Thank You Marcella
Marcella, the thing is, the operator is using a projection of how much oil the well will produce [according to your previous leases language] to determine how much to charge you each month, the charges are essentially as long as there is production. The bad thing is you don't know if they estimated correctly, also what if the equipment needs repair, maintainance or replacement ? Will they recalculate the amount upward ? Probably. The good news is that that Helis well is doing that well, and it is very likely that it will surpass what either one of your older wells in Dunn county have paid you when you get your first check and possibly both, especially because it's on a 1280 acre soacing and not a 2560. It's still possible that operations to drill a well that would include your section 25, in that case you would be held under the old lease. Marathon thinks there is a good chance that they will not start physical preperations in time and that is why they sent a lease renewal. The dollar amount of the lease renewal sounds very low for that area unless we are talking about a house lot sized acreage. Drawing a permit is not considered continuing operations although staking a well could be, but that is very thin. Building a road, pad, drilling a water well or digging a pit would certainly be considered continuing operations. The continuing operations clause is to save the lessee from losing financially if they have made efforts to gain production before the expiration of the lease primary term. A permit to drill isn't much of a hardship as it's only about 8 cents an acre for a 1280 spacing. Permits are applied for and granted, renewed, let expire, companies cancel them themselves. Permits are more of a matter of intent and state approval of that intent, not actual operations.
ROBERT kennedy I ALSO HAVE TOWNSHIP 148 N 95W SECTIONS 4-5--67-9-17-18-19-28-29-30-31-33-also leased by Marathon.NOTHING HAS BEEN DONE IN THESE SECTIONS.That I know of.This should be good when I let my lease expire.Thanks Marcella
Robert one section is not 67 its section 6-7-Thanks Marcella
Yes Marcela, it will be good when they expire. Next time you lease it should be one lease for each spacing so you won't have all of your eggs in one basket.
R.W.Kennedy,I don't understand one lease for each spacing.Can you explain? Thank You Marcella
Each lease should only contain acres from one drilling spacing. If the spacing is a 1280 acre (very common) the lease only concerns the acres in that two section 1280, same with four section 2560 acre spacings (becoming more common) your lease should only be for the acres in that 2560 acre spacing. That way the leases themselves act as pugh clause because each spacing has to be drilled or the lease expires and all of the acres concerned in the expired undrilled lease are free again to be leased. Watch for language that the lease concerns all of your acres wherever they are. You do not want one well to hold more acres than it will drain or than you will receive royalty for. I hope that made things clear. Marcela, as I recall your acres that have recently come open are in a really good area, be very firm in negotiating. Wells near you have initial productions measured above 3,000 barrels a day, even with the lower price of oil right now that's worth something.