Mountrail County Bakken Lease Expiring in 4 Days

I am a mineral owner in Monutrail county, my acres have been under lease with Hunt Oil, it is a 4 year lease, which exprires July 11th, 2011. The acres around us which Hunt Oil also leased was done on a 5 year contract, which expires in December. I just happened to be on the tail end of the leasing and the broker gave me a 4 year contract rather than a 5 year. But now I find myself without a lease. I’m not sure what to do, any suggestions? Should I contact Hunt Oil, should I contact other companies, the original broker?

Mike:

I would first work on the contents of the existing lease such as bonus/acre; % royalty; length of lease. Do your homework and find out the current $/% amount for these items. I would not sign for longer than 3 years and add a Pugh Clause if the current lease does not contain this. Finally, I would contact Hunt and find out their negotiation terms and then contact others who are active in that area; Shop Around. I will be doing this same ground work starting early next year if my current minerals remain undrilled. Just remember that the current bonus and % royalty rates are much higher today than when you signed four years ago.

Thanks Charles. I will start by approaching Hunt next week after the lease has offically expired, I know sinclair bought the state leases and Hess has been leasing and holds a good portion of the acres close by, so I have some options to persue. Could I ask…The Pugh clause, is it meant to deal with the different zones below your acres, or just protecting the acres as a whole once a well is in production?

charles s mallory said:

Mike:

I would first work on the contents of the existing lease such as bonus/acre; % royalty; length of lease. Do your homework and find out the current $/% amount for these items. I would not sign for longer than 3 years and add a Pugh Clause if the current lease does not contain this. Finally, I would contact Hunt and find out their negotiation terms and then contact others who are active in that area; Shop Around. I will be doing this same ground work starting early next year if my current minerals remain undrilled. Just remember that the current bonus and % royalty rates are much higher today than when you signed four years ago.


Mike:

Pugh clauses deal with the zones below the producing zone. In this case, you would be able to lease other zones on your mineral acreage. I would contact Hess is they are active in the area as they tend to be an aggressive drilling operation.
Mike said:

Thanks Charles. I will start by approaching Hunt next week after the lease has offically expired, I know sinclair bought the state leases and Hess has been leasing and holds a good portion of the acres close by, so I have some options to persue. Could I ask......The Pugh clause, is it meant to deal with the different zones below your acres, or just protecting the acres as a whole once a well is in production?

charles s mallory said:

Mike:

I would first work on the contents of the existing lease such as bonus/acre; % royalty; length of lease. Do your homework and find out the current $/% amount for these items. I would not sign for longer than 3 years and add a Pugh Clause if the current lease does not contain this. Finally, I would contact Hunt and find out their negotiation terms and then contact others who are active in that area; Shop Around. I will be doing this same ground work starting early next year if my current minerals remain undrilled. Just remember that the current bonus and % royalty rates are much higher today than when you signed four years ago.

Thanks charles, I appreciate your help.

If yours are in the far Eastern part of the county It may be that it is out of the play. What township and range?

By the way, no one can steal anything from someone by them mentioning a legal description. Many refuse to say what the legal description is like someone will then steal them or that they'll disappear or some other imaginary idea. it's all public record and It's hard to help someone when one has no idea.

True, Joe, but many people don’t know that something bad won’t happen. I was reluctant myself at first to give the legal descriptions and that didn’t change until I had done my fathers probate and had deeds on file in the courthouses. It is absolutely true that the more information you give, the better the advice you receive.

Mineral Joe said:

If yours are in the far Eastern part of the county It may be that it is out of the play. What township and range?

By the way, no one can steal anything from someone by them mentioning a legal description. Many refuse to say what the legal description is like someone will then steal them or that they'll disappear or some other imaginary idea. it's all public record and It's hard to help someone when one has no idea.

Mike,

We are active in the area. Please give us a call.

Austin

303 832 1994

You are right Joe, they are on the Eastern portion of the county, they are in McGahan township but on the western edge of the township. 156-89 section 4. Hunt petioned for 1280 spacing last fall with intentions to drill two wells, one being in section 4. We haven’t seen anything towards a permit. So far McGahan township hasn’t seen any activity but there is to the north, south and just to the west. I know from the surface owner that there was new sesmic done in the last 8 weeks or so. Back in the early 80’s there was a well drilled, which showed traces but not enough to produce.

Mineral Joe said:

If yours are in the far Eastern part of the county It may be that it is out of the play. What township and range?

By the way, no one can steal anything from someone by them mentioning a legal description. Many refuse to say what the legal description is like someone will then steal them or that they'll disappear or some other imaginary idea. it's all public record and It's hard to help someone when one has no idea.

Mike, that twp puts you near the eastern edge. None the less, your minerals are still in the Bakken play and you should easily be able to get them leased. By all means contact Hunt, yet try to show them to at least four or five parties before making a decision. EOG & Hess are the other active nearby 'majors'. Though don't hesitate to show them to some of the smaller players. Often small independents or the speculators can pay you a higher price as a means of getting participation in a tract. Contact the fellow posted above (not a recommendation) and all others who've leased in the area. Bottom line when leasing, "competition is your best friend".

For what it's worth, Hunt paid $1000 for some public minerals in Sec 6, and Sinclair paid $1800 for the same in Sec 5 & 6. I'm not saying you will get these prices. Yet this can give you an idea of how minerals adjacent to yours have been valued. Good luck, hope you strike a great deal.

Thanks Eastern MT,

This helps. I was wondering about EOG, we have producing minerals with EOG to the NW of this lease. I plan on contacting Austin also (from above comment). I'm just going to wait until next week when the lease expires, and then I guess I can go to work and see what's available. I sure appreciate your help!

Eastern MT said:

Mike, that twp puts you near the eastern edge. None the less, your minerals are still in the Bakken play and you should easily be able to get them leased. By all means contact Hunt, yet try to show them to at least four or five parties before making a decision. EOG & Hess are the other active nearby 'majors'. Though don't hesitate to show them to some of the smaller players. Often small independents or the speculators can pay you a higher price as a means of getting participation in a tract. Contact the fellow posted above (not a recommendation) and all others who've leased in the area. Bottom line when leasing, "competition is your best friend".

For what it's worth, Hunt paid $1000 for some public minerals in Sec 6, and Sinclair paid $1800 for the same in Sec 5 & 6. I'm not saying you will get these prices. Yet this can give you an idea of how minerals adjacent to yours have been valued. Good luck, hope you strike a great deal.

HI,

Mountrail is not the hottest county in ND but it is close to McKenzie. I am surprised that no one has contacted you. I do only 3 yr contracts because everything changes so quickly. Now seems to be the hottest time for ND. I have recently leased all the interests we have in ND. Most are small to medium size but they are all leased. The best in April was $1200 per acre bonus, 20% royalty and 3 year length. I would assume someone will be calling you unless Hunt Oil has started producing on your lease.

Hope this helps.

HI,

Mountrail is not the hottest county in ND but it is close to McKenzie. I am surprised that no one has contacted you. I do only 3 yr contracts because everything changes so quickly. Now seems to be the hottest time for ND. I have recently leased all the interests we have in ND. Most are small to medium size but they are all leased. The best in April was $1200 per acre bonus, 20% royalty and 3 year length. I would assume someone will be calling you unless Hunt Oil has started producing on your lease.

Hope this helps.

Thanks Rick, it does help. I am not sure why the lease expiration has went unnoticed by Hunt, I hold three fourths of the minerals, the surface owner holds one fourth. The surface owner received a 5 year lease which runs out this December, but I was offered the 4 year lease due to being leased 6 months after the fact, which creates this opening or opportuinity if it is such. There is no activity on the property and the lease papers I have were dated July 10th, so by rights the lease has expired. I’m going to give it a couple days and then call Hunt and if they acknowledge the lease has expired then I guess I can do some checking around.

Rick Tatum said:

HI,

Mountrail is not the hottest county in ND but it is close to McKenzie. I am surprised that no one has contacted you. I do only 3 yr contracts because everything changes so quickly. Now seems to be the hottest time for ND. I have recently leased all the interests we have in ND. Most are small to medium size but they are all leased. The best in April was $1200 per acre bonus, 20% royalty and 3 year length. I would assume someone will be calling you unless Hunt Oil has started producing on your lease.

Hope this helps.

Mike,

Yours are not too far East or out of the play. The well that Hunt and the one that Whiting have just a couple miles to the West of yours are decent so they surely just over looked the expiration of your lease. Yours are spaced with section 5 and Hunt is drilling a well right now just 3 miles West of it. Since the lease has expired and you own 3/4ths you should be able to get a better deal.

With the bad weather delays, I think many ND leases will expire this year, as the schedules were already tight.

RW:

I think you hit the nail on the head in regards to leases expiring due to bad weather delays. I think that top leasing in both ND and Montana will be very common over the next several months. There are just too many undrilled acres in the Williston Basin and large % of these were leased back in 2008 - 2009. We could also see acreages which have been temp. spaced by a certain operator being drilled by a completely different operator. If these old leases have to be renewed, you are talking about some serious $ at todays bonus rates not to mention a higher % royalty.

r w kennedy said:

With the bad weather delays, I think many ND leases will expire this year, as the schedules were already tight.