I HAVE RECEIVED AN OFFER FOR THE SUBJECT MINERAL RIGHTS AND WONDER IF THE PROPOSED TERMS ARE REASONABLE FOR THE SITUATION.
THE KEY PROPOSED TERMS ARE $5.00 PER ACRE FOR THE FIRST 5 YEARS AND $10.00 PER ACRE FOR THE SECOND 5 YEARS AND A ROYALTY OF 1/8 OR 12.5%
I UNDERSTAND THAT THERE IS NO RECENT DRILLING IN THE IMMEDIATE AREA AND THAT THE DEVELOPER IS ASSEMBLING A PACKAGE AND HOPES TO FIND A COMPANY WHICH WILL COME AND DRILL.
SINCE I AM NOT IN THIS BUSINESS I HAVE NO WAY OF KNOWING IF THIS IS REASONABLE OR NOT. ANY INFORMED COMMENTS WOULD BE WELCOME
From what I understand, these companies come in with very low bids until the word is out.
I would be concerned especially with the 1st 5 year proposal. Please correct me if I am wrong, but, even if they find something in the first 5 years, do you not receive royalties?
Also, I have some friends that have benefitted from the Bakken, the bid you are being offered is very low. Unless the drilling is not a success.
I am no expert on this either, this is personal opinion. And going off what 4 of my friends have experienced with offers recently. I hope this helps.
We have had some 5 public forums here in Fergus county in the past few months. It is all about the Heath formation and then some natural gas in the north part of the county so far. The oil companies have been buying property in town (Lewistown) and making other preparations. I will make some inquiries but because of the state of development and drilling, it is probably early to get the really good offers.
I agree with Will. Due to the early stages of the exploration the offers will be low. There are 6 oil companies exploring the Heath formation and 2 of them are looking at drilling this year, the others I am unsure as the information provided is sparse. One is focusing on Petroleum county, another on Judith Basin.