Recently was contacted by Contex Energy. For mineral rights leasing for T156N-R91W, Section 1: S ½ SW 1/4.Was offered 800/net mineral acre, 18% Royalty. Want to know if this is a good offer.
Dustin:
Looking at the State Mineral Auction site, it appears that bonus amounts for this Township/Range was $250/acre. The bonuses sky rocketed in Township 153. I'm not familiar with this Township area but I would bump the % royalty to 20% for a 3 year lease. You might post this under "County Groups" on this forum in regards to the current bonus amounts for this Township.
Dustin,
STOP! Don't agree to anything regarding the lease until you know where you stand. Immediately try to verify this information.
It appears your minerals have been pooled with others (W1/2 of Sec 1, E1/2 of Sec 2 in 156-90, and all of Sec 32 in 157-90) and EOG has just begun to drill on this interest last week! Per the NDIC map, EOG Resources began drilling a well the "Clearwater 25-3202H" on Aug. 3rd. This well bore is in 157-90, Sec 32 directly north of your minerals. It was permited to be drilled for 19,302 feet (ie... under a 1,280 acre tract). Your minerals under T156N-R91W, Sec 1: S1/2 SW, are part of their 1,280 acres.
This dramatically increases the leasing value of your minerals. Again, determine is this is accurate. Then ask Contex whom they are leasing for (they are a leasing company, not an oil company). I suspect it's EOG trying to tie up loose ends on the acreage. Likely you have a small interest, with a recently expired lease, or were initially overlooked.
Inform Contex you're aware of the well being drilled and negotiate accordingly. Successful wells have been drilled in every direction around your interest. Most were modest producers, but a couple IP'd at 500 and 700 bbls per day. This is not great production but it confirms your minerals are almost certain to produce.
Don't be shy. Ask for a 25% royalty without any costs, and a $3,000 per net acre bonus (or more). The Contex rep will say that is impossible. Though don't cave too easily. Insist on a minimum of a 22% royalty without any costs. You could be more flexable on the bonus amount. My best guess is you should be able to secure a lease with a 22% royalty and at least twice or three times the amount of their initial net acre bonus offer. Go do your homework and good luck!
P.S. Or, if you don't want to bother, and you have good title, I'll give you a $1000 and 19%. ;)
Still have not agreed to anything on this lease as it took awhile for my stepfather and my brother to make up their minds what they wanted to do. We are in the process of getting a mineral quit claim deed for them to sign, so I will obtain all interests to such mineral lease. I also have to do the process of probate with my grandparent's and my mother's estates in ND. This will take up to six months. Should I go ahead and negotiate with Contex with the information I have obtained above? Have done some research in the past few months regarding minerals and leasing and I also want to make sure all this trouble (paying a lawyer for probate in ND) will be worth it in the long run.
Eastern MT said:
Dustin,
STOP! Don't agree to anything regarding the lease until you know where you stand. Immediately try to verify this information.
It appears your minerals have been pooled with others (W1/2 of Sec 1, E1/2 of Sec 2 in 156-90, and all of Sec 32 in 157-90) and EOG has just begun to drill on this interest last week! Per the NDIC map, EOG Resources began drilling a well the "Clearwater 25-3202H" on Aug. 3rd. This well bore is in 157-90, Sec 32 directly north of your minerals. It was permited to be drilled for 19,302 feet (ie... under a 1,280 acre tract). Your minerals under T156N-R91W, Sec 1: S1/2 SW, are part of their 1,280 acres.
This dramatically increases the leasing value of your minerals. Again, determine is this is accurate. Then ask Contex whom they are leasing for (they are a leasing company, not an oil company). I suspect it's EOG trying to tie up loose ends on the acreage. Likely you have a small interest, with a recently expired lease, or were initially overlooked.
Inform Contex you're aware of the well being drilled and negotiate accordingly. Successful wells have been drilled in every direction around your interest. Most were modest producers, but a couple IP'd at 500 and 700 bbls per day. This is not great production but it confirms your minerals are almost certain to produce.
Don't be shy. Ask for a 25% royalty without any costs, and a $3,000 per net acre bonus (or more). The Contex rep will say that is impossible. Though don't cave too easily. Insist on a minimum of a 22% royalty without any costs. You could be more flexable on the bonus amount. My best guess is you should be able to secure a lease with a 22% royalty and at least twice or three times the amount of their initial net acre bonus offer. Go do your homework and good luck!
P.S. Or, if you don't want to bother, and you have good title, I'll give you a $1000 and 19%. ;)
Dustin Larson said:
Still have not agreed to anything on this lease as it took awhile for my stepfather and my brother to make up their minds what they wanted to do. We are in the process of getting a mineral quit claim deed for them to sign, so I will obtain all interests to such mineral lease. I also have to do the process of probate with my grandparent's and my mother's estates in ND. This will take up to six months. Should I go ahead and negotiate with Contex with the information I have obtained above? Have done some research in the past few months regarding minerals and leasing and I also want to make sure all this trouble (paying a lawyer for probate in ND) will be worth it in the long run.
Eastern MT said:Dustin,
STOP! Don't agree to anything regarding the lease until you know where you stand. Immediately try to verify this information.
It appears your minerals have been pooled with others (W1/2 of Sec 1, E1/2 of Sec 2 in 156-90, and all of Sec 32 in 157-90) and EOG has just begun to drill on this interest last week! Per the NDIC map, EOG Resources began drilling a well the "Clearwater 25-3202H" on Aug. 3rd. This well bore is in 157-90, Sec 32 directly north of your minerals. It was permited to be drilled for 19,302 feet (ie... under a 1,280 acre tract). Your minerals under T156N-R91W, Sec 1: S1/2 SW, are part of their 1,280 acres.
This dramatically increases the leasing value of your minerals. Again, determine is this is accurate. Then ask Contex whom they are leasing for (they are a leasing company, not an oil company). I suspect it's EOG trying to tie up loose ends on the acreage. Likely you have a small interest, with a recently expired lease, or were initially overlooked.
Inform Contex you're aware of the well being drilled and negotiate accordingly. Successful wells have been drilled in every direction around your interest. Most were modest producers, but a couple IP'd at 500 and 700 bbls per day. This is not great production but it confirms your minerals are almost certain to produce.
Don't be shy. Ask for a 25% royalty without any costs, and a $3,000 per net acre bonus (or more). The Contex rep will say that is impossible. Though don't cave too easily. Insist on a minimum of a 22% royalty without any costs. You could be more flexable on the bonus amount. My best guess is you should be able to secure a lease with a 22% royalty and at least twice or three times the amount of their initial net acre bonus offer. Go do your homework and good luck!
P.S. Or, if you don't want to bother, and you have good title, I'll give you a $1000 and 19%. ;)
Dustin, Eastern MT is telling you your acres are good, not spectacular but good. I think they are even a little better than that due to better completion tecniques today than when many of those wells surrounding you were drilled. I think you could negotiate a lease of $3000 bonus and 20% + but you will have to fight for it, fight for what is yours and do even more homework. If you won't do that, you may as well accept Eastern MT's offer and they can fight it to $3k an acre and 22% and show a tidy profit that could have been yours. You can't abdicate responsibility on this without giving up the money with it. The operator would either meet my price or force pool me and carry my interest and no operator in their right mind would want to carry your interest on these acres and have their profit capped to 50% of actual drilling cost, after which you get it all and the operator gets nothing. As for whether the probates are worth doing, you never said how many acres you have and how much your lawyer charges. You can probate anywhere in the state, pick a sleepy eastern ND non oil patch county and it may be faster and cheaper. I'd say it was worth it if you had as much as 10 net acres in the near term, long term as little as 3 acres should show you an upside
Dustin,
Probate will take time, yet in the meantime you should conclude a lease (with payment later). Drilling began since you last posted and your position is even stronger today than then.
Your minerals (156-91 Sec 1: S 1/2 of SW 1/4) already has an interest in TWO (currently "Confidential") wells. Both wells are within the same 1,280 acre drilling unit and you'd have an equal share in each (the amount based on your net acres).
1. #22588, "Idaho 1-0132H", in 156-91 Sec 1 SESW, EOG spud on 4-13-2012.
2. #19888, "Clearwater 25-3202", in 157-90 Sec 32 NENW, EOG spud 8-3-2011.
The "Idaho" well has not been completed yet. Although on confidential status, the "Clearwater" well reports February sales of 10,354 bbls. To the east, adjacent to yours (but not yours), is another confidential well which sold 14,718 bbls in February. The "Idaho" well (your new one) is now being drilled between these two.
Your unleased interest is a headache to EOG. Even though the minerals are subject to Probate, I'm sure EOG would like to get you (probably along with your step-father & brother) signed to a lease. Inform Contex you know of these wells and want to conclude a deal. Your Lease and bonus payment should be held in escrow until the Probates are completed, but strike the deal now.
Mr. Kennedy is right. It is worth the hassle. Also, his suggestion to file Probates in another ND county rather than in Stanley is good. Taking it to a court in a county which isn't so busy should speed things up. Royalty on these wells won't make you rich but they'll provide income for decades to come. Think in terms of the Lease bonus money as repaying you for all Probate expenses to secure title. So ask for $3,000 per net acre, and don't settle for less than $2,000. Ask for 25% royalty, and then don't settle for less than 20%. Call Contex and go get 'em. Good Luck.
Eastern MT said:
Dustin,
Probate will take time, yet in the meantime you should conclude a lease (with payment later). Drilling began since you last posted and your position is even stronger today than then.
Your minerals (156-91 Sec 1: S 1/2 of SW 1/4) already has an interest in TWO (currently "Confidential") wells. Both wells are within the same 1,280 acre drilling unit and you'd have an equal share in each (the amount based on your net acres).
1. #22588, "Idaho 1-0132H", in 156-91 Sec 1 SESW, EOG spud on 4-13-2012.
2. #19888, "Clearwater 25-3202", in 157-90 Sec 32 NENW, EOG spud 8-3-2011.
The "Idaho" well has not been completed yet. Although on confidential status, the "Clearwater" well reports February sales of 10,354 bbls. To the east, adjacent to yours (but not yours), is another confidential well which sold 14,718 bbls in February. The "Idaho" well (your new one) is now being drilled between these two.
Your unleased interest is a headache to EOG. Even though the minerals are subject to Probate, I'm sure EOG would like to get you (probably along with your step-father & brother) signed to a lease. Inform Contex you know of these wells and want to conclude a deal. Your Lease and bonus payment should be held in escrow until the Probates are completed, but strike the deal now.
Mr. Kennedy is right. It is worth the hassle. Also, his suggestion to file Probates in another ND county rather than in Stanley is good. Taking it to a court in a county which isn't so busy should speed things up. Royalty on these wells won't make you rich but they'll provide income for decades to come. Think in terms of the Lease bonus money as repaying you for all Probate expenses to secure title. So ask for $3,000 per net acre, and don't settle for less than $2,000. Ask for 25% royalty, and then don't settle for less than 20%. Call Contex and go get 'em. Good Luck.
Dustin Larson said:
Just got this response from Contex after I negotiated 22% royalty with no costs and 3000 per net min acre.
"I just got a reply from EOG and they said the highest they would go in this area is $800/nma and 18% --- their geologist had actually re-evaluated this area after I originally sent out the lease and they lowered their top bonus to $500/nma after that evaluation."
Are they pulling my leg?
Also am not sure how many acres I have. It says on the bank draft:
Gross acres: 80.00
Net Acres: 0.16
Surely I have the 80 and not the .16 of an acre, or is it .16 of 80 acres?
Eastern MT said:Dustin,
Probate will take time, yet in the meantime you should conclude a lease (with payment later). Drilling began since you last posted and your position is even stronger today than then.
Your minerals (156-91 Sec 1: S 1/2 of SW 1/4) already has an interest in TWO (currently "Confidential") wells. Both wells are within the same 1,280 acre drilling unit and you'd have an equal share in each (the amount based on your net acres).
1. #22588, "Idaho 1-0132H", in 156-91 Sec 1 SESW, EOG spud on 4-13-2012.
2. #19888, "Clearwater 25-3202", in 157-90 Sec 32 NENW, EOG spud 8-3-2011.
The "Idaho" well has not been completed yet. Although on confidential status, the "Clearwater" well reports February sales of 10,354 bbls. To the east, adjacent to yours (but not yours), is another confidential well which sold 14,718 bbls in February. The "Idaho" well (your new one) is now being drilled between these two.
Your unleased interest is a headache to EOG. Even though the minerals are subject to Probate, I'm sure EOG would like to get you (probably along with your step-father & brother) signed to a lease. Inform Contex you know of these wells and want to conclude a deal. Your Lease and bonus payment should be held in escrow until the Probates are completed, but strike the deal now.
Mr. Kennedy is right. It is worth the hassle. Also, his suggestion to file Probates in another ND county rather than in Stanley is good. Taking it to a court in a county which isn't so busy should speed things up. Royalty on these wells won't make you rich but they'll provide income for decades to come. Think in terms of the Lease bonus money as repaying you for all Probate expenses to secure title. So ask for $3,000 per net acre, and don't settle for less than $2,000. Ask for 25% royalty, and then don't settle for less than 20%. Call Contex and go get 'em. Good Luck.
Dustin, The South half of a SW quarter is 80 Gross acres. The 0.16 Net acres they show may be correct (or not). Either way, what you own is expressed in NET acres. If Probates are yet to be done, it's possible they show separate interests for all your Mom's heirs, such as your brother and step-father too (ie... 3 x 0.16 net acres for your Mom's former interest split among her heirs). You could ask Contex what they show for your Mom's entire NET acres. Then ask them how they calculated that amount as hers (perhaps Grandpa's minerals were divided among more folks than you thought). I can't tell you what you (or your Mom) owned. The only way to confirm that is to run the records on that land back in the Stanley court house.
As to Contex reducing the offer; $500 to $800 per acre is extremely low for producing areas. Though the wells drilled to date show this area has "fair to good", not great, production. So EOG may be less fond of it today, than they were in 2010.
Though when a NET interest is quite small (0.16 acres) it's common to forget the net acres and negotiate a flat dollar amount (say $500 total). Though if that is the case I'd rather see you secure the 20% royalty even if you must accept less bonus dollars to obtain it. I'd think the "headache" factor would prompt EOG just to sign a deal to put it behind them, especially on a very small interest. First find out what Mom owned, then push them for at least the 20%. Good Luck.
OK. Have a question about the Clearwater well. The money is going into escrow right now since we are doing the probate. Where does the escrow money go? Can you see how much is in there? Can the lawyer look for this?
Dustin Larson said:
Eastern MT said:Dustin,
Probate will take time, yet in the meantime you should conclude a lease (with payment later). Drilling began since you last posted and your position is even stronger today than then.
Your minerals (156-91 Sec 1: S 1/2 of SW 1/4) already has an interest in TWO (currently "Confidential") wells. Both wells are within the same 1,280 acre drilling unit and you'd have an equal share in each (the amount based on your net acres).
1. #22588, "Idaho 1-0132H", in 156-91 Sec 1 SESW, EOG spud on 4-13-2012.
2. #19888, "Clearwater 25-3202", in 157-90 Sec 32 NENW, EOG spud 8-3-2011.
The "Idaho" well has not been completed yet. Although on confidential status, the "Clearwater" well reports February sales of 10,354 bbls. To the east, adjacent to yours (but not yours), is another confidential well which sold 14,718 bbls in February. The "Idaho" well (your new one) is now being drilled between these two.
Your unleased interest is a headache to EOG. Even though the minerals are subject to Probate, I'm sure EOG would like to get you (probably along with your step-father & brother) signed to a lease. Inform Contex you know of these wells and want to conclude a deal. Your Lease and bonus payment should be held in escrow until the Probates are completed, but strike the deal now.
Mr. Kennedy is right. It is worth the hassle. Also, his suggestion to file Probates in another ND county rather than in Stanley is good. Taking it to a court in a county which isn't so busy should speed things up. Royalty on these wells won't make you rich but they'll provide income for decades to come. Think in terms of the Lease bonus money as repaying you for all Probate expenses to secure title. So ask for $3,000 per net acre, and don't settle for less than $2,000. Ask for 25% royalty, and then don't settle for less than 20%. Call Contex and go get 'em. Good Luck.