New to this Please help Section 25 block c-1

LDetter · May 16, 2019, 12:46am

I am just been notified I am 1/9 mineral interest owner on 320 acres on Section 25 block c-1. Can someone help me calculate what this means? Its also a PSL survey A-1325 if that helps.

Can anyone tell me what the going rate is Delaware Basin is the company apparently interested in my land area.

Stephen_Watkins · May 16, 2019, 1:18am

Ms. Detter,

 1/9 interests in 320 acres is .11111 /x 320 = 35.55555 Acres.  If you can find a Township and Range for the property I can find it.  I am, unfortunately, completely ignorant of a PSL survey - hopefully some one more cognizant of land surveys can help you.

  All that being said, 35.55 acres of 320 acres is significant, particularly if it is located in a "Stacked Play" area.  A "Stacked Play" is multiple formations stacked upon another - and mostly shale plays.  The formations in the Delaware Basin that I am familiar with are the Barnett, Wolfcamp A & B, Bone Springs A and B, and the Avalon.  These are the deeper, more prolific formations and there are a couple more possible formations in the Delaware era which are shallower and should be considered the last formations to be produced.  Start Deep and work your way up.

My best wishes and Good Luck Girl!!

ABond · May 16, 2019, 1:20am

1/9 mineral interest means you own 11.11% mineral interest, meaning you own executive, bonus and royalty. You have the right to sign an OGL, receive bonus, and get paid a royalty on any production as a result. You own about 35.555556 net mineral acres. You calculate this by taking your mineral interest and multiplying it by the gross acres in your tract, in this case 320.

Don’t know anything about bonuses in Delaware Basin right now. Sorry.

LDetter · May 16, 2019, 1:24am

Thank you so much! I have no idea what Stack play is. I am SOOOO new to this. I am going to try to get more information.

Ben_Helms · May 16, 2019, 1:27am

REEDBUCK STATE UNIT 25 is a producing well in that abstract (operated by PRI OPERATING, LLC)…the well produced in excess of 300k in the first 12 months, which is excellent. Depending on the royalty of the controlling lease I would say 1 net mineral acre in this abstract would be worth $20k to $30K to the right buyer. Congrats, great property

LDetter · May 16, 2019, 1:28am

Thank you!!! What is OGL? And what are bonuses? All I know as of now is Delaware Basin Resources, LLC is the company and Delaware Basin the client of the landman who spoke to me.

Does anyone know if my area is a “hot” area? Am I looking at any real money coming out of this?

LDetter · May 16, 2019, 1:32am

Really?! Oh my! Thank you! How would I find out my royalty?

LDetter · May 16, 2019, 1:41am

Also is it bad it Public school survey?

Stephen_Watkins · May 16, 2019, 1:49am

Ms Detter,

 Your royalty should be at least 20% and if it's the right place and right time you may be able to up the Royalty by 2 to 2.5% in this day and time.  Shoot, while negotiating I would demand 25% and see what happens.  I can not calculate what the bonuses are . . . . but it appears to me you should be able to get a significant amount for just making the lease!  My company's first bonus was 2K an acre but fortunately for us the lease was close to expiration before the first well was even staked.  In our lease renewal I was able to negotiate a 22.5% Royalty along with a very significant second bonus!  You don't know until you PUSH!!  Good Luck!!

Stephen Watkins

Stephen_Watkins · May 16, 2019, 1:51am

Hey Mr. Helms,

  Good catch and great information!  You sir are a "Gentleman"!

Stephen Watkins

LDetter · May 16, 2019, 1:54am

So the one I need to be negotiating with is the landman? He is who found us. So a royalty is a one shot deal lump sum for signing the lease then we would receive monthly money as they continue to drill? I apologize for my incompetence. This is seriously like a foreign language.

When landmen contact people…it is because a company is interested in leasing from us correct?

Stephen_Watkins · May 16, 2019, 2:07am

Yep,

 Think "High" when talking to them . . . demand slightly "Outrageous" and work it from there.  I recommend that you either find an Oil/Gas lawyer or another Landsman and hire them.  Landsman are probably more familiar with the location and activity around your property.  Landsmen are much less expensive than lawyers so I would start with the landsman.  That being said, getting a good experienced lawyer to guide you through the leasing process would be a very good thing.

Stephen Watkins

ABond · May 16, 2019, 2:09am

OGL = Oil and Gas Lease Bonus is the dollar amount per net mineral acre the Lessee (the person who is taking the lease) must pay you.

Yes you will negotiate with the Landman. If you don’t feel like it’s something you understand well enough, don’t hesitate to have an oil and gas law attorney negotiate in your behalf. Like previously mentioned, Reeves County is a very valuable area right now, so an attorney might be the route you want to take.

Brenda_Johnson · May 16, 2019, 4:29am

Your lease should have 25% royalty - no less. I always use an oil and gas attorney GDSM in Austin. They produce an Amendment to the Lease for your protection and work out the details with the Company. I usually negotiate my own Bonus. I ask this Forum what rates are going for in my particular Section. The last offer I had was 8K nma for PSL area. I decided to wait until the offers go up.

James_D_Bruns · May 16, 2019, 12:02pm

You sound like me some time ago when I received a call from a landman about leasing inherited property. This year I decided to go to Royalty Owners Institute in Fort Worth. I learned more in 3 days than I could in 3 years. Now I appreciate what the landman and oil and gas attorneys can do for me as well as how to manage the property. For a total neophyte it’s worth the money. royaltyownerinstitue.org

NMoilboy · May 16, 2019, 3:22pm

Please don’t take any of these as definitive facts, but this is what I gathered or think:

You ostensibly own 35.55 mineral acres in Sec 25, we aren’t sure where in Sec 25 but it may not matter
Your land is, presumably, unleased since you don’t know anything about this and there should not be old leases here.
Delaware Basin Resources is offering to either lease your minerals, or buy them. One would guess lease them.
If you sign an OGL (lease), you will receive an upfront bonus (per mineral acre), then you will get an agreed upon portion of the proceeds from that acreage (the royalty). They should be offering you a 25% royalty. Would guess bonus is something in the $5k-10k range.
I’m 98% sure that Delaware Basin Resources = Patriot (PRI Operating) = The operator of wells in the section. DBR has signed > 30 leases in Sec 25 in the last 3 years. Let’s assume that the operator is offering you a lease.
Patriot drilled two Reedbuck State Wells in 2018. Which are currently producing. All acreage in Sec 25 and Sec 6 was pooled into a 1305 acre unit. So that means your unleased acreage has been pooled. There are notes on the well permits saying that there was unleased acreage in Sec 25. That’s probably you (and others, perhaps). In theory they had to offer you a lease prior to drilling the wells, chances are they didn’t know how to find you, so they posted a notice in the Midland paper and submitted that to the TRRC (texas O&G governing body) as part a Rule 37 exception, thus they can get a permit where unleased minerals are pooled. Chances are they were just going fast in getting the wells drilled and didn’t get everybody leased, or maybe didn’t know how to find you until now.
Because you are unleased, you should, in theory get “carried” in those two wells. Which means that once the wells generate enough net revenue to pay for the costs, you should get revenue equal to a 100% royalty lease on those two wells. That’s not a great deal for the operator, so they are still trying to get you leased. You should probably want to get leased, IMO. It’s just a lot cleaner.

I would suggest being proactive. Call PRI in Midland. Ask to speak to the someone in the Land Department, then ask to speak to somebody covering Reeves county. Tell them you think you own 35 unleased mineral acres in the Reedbuck unit. They should be able to verify that is the case. They are going to want you leased. Which is why Delaware Basin is calling you. But it’s probably easier to talk to the operator directly as I think you need to figure out what the deal is with your share of the two existing wells. So talk to them about a lease offer and what the scoop is on having two active producers on your currently unleased minerals. You both probably want the same thing, for you to be leased, so they should be fairly upfront with you.

I don’t know what bonus are going for around there. I would guess maybe $10k/acre. Your royalty should definitely be 25%.

Your acreage is pretty decent. Good Wolfcamp A & B wells. Maybe some BoneSprings down the line.

Maybe I’m wrong on all of that, best of luck.

LDetter · May 17, 2019, 1:15am

Fantastic information thank you!!!

Do we get retroactive royalties for the time they drilled but we werent found yet?

NMoilboy · May 17, 2019, 12:24pm

I would think they would pay you from day 1. I asked landman friend and he said “probably”. Maybe he isn’t the best landman.

This is why I would call PRI and talk to them directly, about a lease and about the existing wells. Good luck.

LDetter · May 17, 2019, 11:43pm

Thank you I appreciate it

Susan_Myers · May 18, 2019, 2:10am

Lauren, my two adult children inherited 2.5 acres of mineral rights from their dad. Delaware Basin requested to lease the 5 acres in 2015 and the bonus was about $3,000 an acre. Their decimal interest for each is .00049 and their monthly royalty checks for each is under $1,000. We have been impressed with PRI, everything seems to be transparent and ethical. Will Smith, Senior Landman, has been so courteous, responsive and has tried to answer all questions. You and your family should be fine in your dealings with PRI.