Mineral Rights in Cochran County

My family and I have just learned of some rights we have in Cochran County. We have received a lease proposal and are actively discussing the terms of the lease with an attorney. The short version is that we are being offered $500/acre for 3 year drilling rights with a 2 year option at the same price. Royalty award is 1/5. Although we have many, my first question to those of you with experience in this and may know this area is; Do you, in your opinion, think this is a fair offering? It seems to be the standard as we have been told by the proposer. Any thoughts or leads would be greatly appreciated.

Thanks,

Laura Judd

Laura,

We need to know the location in Cochran County. Location can make a difference. We can check the GIS Map and see if there is any production or activity in the area of your minerals. What is the Abstract, Section and Block #'s.

Thanks,

Clint Liles

Hi, Clint,

Thank you for responding so quickly. Ours is in section 5, block Z, public school lands. Thank you again for any insight you may have. Laura Judd

Hello Laura,

The nearest production I find is 2 to 3 miles to the East. And also some production about the same distance to the north/northwest. After checking some of the producing wells in the area I see where the targeted zones are the Devonian, Levelland, and Buckshot. These are all vertical wells. There is definitely production in the area. I tried pulling production information on well 31321 in A-157/Section 5 but it was plugged in August 1982. There are several dry holes and plugged oil wells in the surrounding area. Dry holes from years ago don't mean much today. This link is to the Production Data on a well(API 079-31321) to the east of your Section 5. This well was completed in March 2011 into the Devonian formation.

http://webapps2.rrc.state.tx.us/EWA/specificLeaseQueryAction.do?tab...

The 3 year lease time frame is alright but I would not accept the 2 year extension. Considering there is production in the surrounding area I would ask for $750 per acre(negotiable). I'm glad you are presenting this to an attorney.

GIS Map of Cochran County Section 5/Block Z and surrounding area:


To make the map larger place your curser/pointer on the map and click.

Clint Liles

Laura-

Suggest starting at $1000/25%/3 yrs.

Laura,

Make use of the good advice these people on the Forum offer.

Get a good O&G attorney ... one who has a background with negotiating leases and protecting your interests.

The "proposer" will tell you anything to get you to sign. There are no set standards in these leases.

The leases are made up to benefit them ... not the landowner.

Good luck,

Pat

I believe Panhandle Oil and Gas has recently leased minerals in Sections 63, 62, and 61 just east of your minerals to Anthem Oil and Gas Inc. A large part of the Panhandle business model is to lease minerals it owns to other oil companies for development. You might have your attorney obtain a copy of the Panhandle lease and see if it is a no deductions, no cost lease you could use. I believe this may be a horizontal San Andres play. Anthem has leased many sections other than 63, 62, and 61.

There is mention of a large project in Cochran county near the end of this recent Panhandle Oil and Gas presentation: http://www.panhandleoilandgas.com/east-coast-ideas-conference-boston-ma-june-28-29-2016

See slides 17, 18, and 19 in this presentation for information on Cochran county which could be very important to you, Ms. Judd: http://www.panhandleoilandgas.com/Websites/panhandle/files/Content/47169/East_Coast_Investor_Presentation-Boston_June_29,_2016.pdf

This Ring Energy presentation has some information on Hz San Andres well economics in Gaines-Andrews area: http://ringenergy.com/Other-Presentations/Augustus_Roadshow%20Presentation_04_26_2016.pdf