My sisters and I have approximately 1,000 acre of land and mineral rights just south of Froid, Montana and have a lease with Whiting that will expire in August. We were recently contacted by Whiting and asked to renew our lease for $250 per acre for 3 years and 17% royalty. There are currently two wells drilled and producing fairly close to our property. When indicating to the Whiting broker that we weren't interested in these terms, she told me that our property was not in the Baken area and the production was less than other areas? Can someone shed light as to what the going lease rate is for this area of Roosevelt County and why the production is lower? On the map, our property is definitely located in the Baken area, so I'm not sure what she meant. All responses will be appreciated.
Fay:
It would help if you could provide the Township/Range/Section information for your mineral area. You are correct in that this area is definitely in the Bakken but the wells that have been drilled thus far, have not been high producers as compared with some in other areas of Roosevelt and Richland Counties. On the other hand, this area has not been drilled extensively as many sections remain undrilled. The area also consists of some older vertical wells (some targeting the Red River Formation) and of these wells some currently producing while others are plugged. In my opinion, I would not consider consider leasing for $250/acre or the 17% royalty at this time. The 3 year lease term is the norm. I would let the lease the expire in August and wait until other offers are made. Keep in mind, all it will take is for one or more good producers in the area for the leasing figures to change. Also, the area has various other formations besides the Bakken, such as the Three Forks which have not been targeted to date. Bottom line, I would not sign for less than a 20% royalty and my lowest bonus per acre would be no less than $500/acre but the lease would be negotiated with a pugh clause thus protecting the formations beneath the Bakken. I have approx. 300 net mineral acres in this area, specifically in T30N;R59E;Sec 6&7 and T30N;R58E;Sec 1&12. My lease will expire in early 2014 and I will allow the lease(s) to expire and wait for new offers.
Fay,
If your minerals are in the vicinity of Township 30-56 (South of Froid) you are definitely in the Bakken. There is a deep seated fault zone that runs thorough the area trending NE-SW. If you are west of the fault, the Bakken is considerably higher and may not be as mature hyddrocarbon wise. It is, nevertheless under development in Mr. Mallory's area.
I suspect that you are east of the fault because Whiting is taking lease extensions in that township of 24-36 months, has an active permit, and a couple of recent completions in the Bakken. I agree with Mallory, let the leases expire, find out what is going on in the vicinity of your acreage and make a plan that protects your upside potential. Whiting is a good outfit and knows what it is doing. Like everybody but our government, however, it too has limited drilling funds and must adhere to its business plan.
Gary L. Hutchinson said:
Fay,
If your minerals are in the vicinity of Township 30-56 (South of Froid) you are definitely in the Bakken. There is a deep seated fault zone that runs thorough the area trending NE-SW. If you are west of the fault, the Bakken is considerably higher and may not be as mature hyddrocarbon wise. It is, nevertheless under development in Mr. Mallory's area.
I suspect that you are east of the fault because Whiting is taking lease extensions in that township of 24-36 months, has an active permit, and a couple of recent completions in the Bakken. I agree with Mallory, let the leases expire, find out what is going on in the vicinity of your acreage and make a plan that protects your upside potential. Whiting is a good outfit and knows what it is doing. Like everybody but our government, however, it too has limited drilling funds and must adhere to its business plan.
Gary L Hutchinson
Minerals Management
Fay, did you have a question?
fay c weber said:
Gary L. Hutchinson said:Fay,
If your minerals are in the vicinity of Township 30-56 (South of Froid) you are definitely in the Bakken. There is a deep seated fault zone that runs thorough the area trending NE-SW. If you are west of the fault, the Bakken is considerably higher and may not be as mature hyddrocarbon wise. It is, nevertheless under development in Mr. Mallory's area.
I suspect that you are east of the fault because Whiting is taking lease extensions in that township of 24-36 months, has an active permit, and a couple of recent completions in the Bakken. I agree with Mallory, let the leases expire, find out what is going on in the vicinity of your acreage and make a plan that protects your upside potential. Whiting is a good outfit and knows what it is doing. Like everybody but our government, however, it too has limited drilling funds and must adhere to its business plan.
Gary L Hutchinson
Minerals Management