My sister, two brothers and I own minerals in McKenzie County and have had an offer to lease. I am wondering what the going rate would be in 154-94-31. I would appreciate any information.
Since 900,000 plus barrels of oil have been pulled out of the spacing just west of you in less than 4 years by the 2 wells in that spacing, I would say you are in a good area. Considering the potential I would ask at least $4,000 per acre and 23% royalty with no deductions, if I would lease it at all. I'm amazed that an area that good is not drilled yet. Just curious, does you family hold a large acreage position and they just would not drill until they found you and got a lease signed ?
Julia:
I tend to agree with Mr. Kennedy reagarding your undrilled area. I would negotiate for $5,000/acre and 23% royalty on a two year maximum lease. Seeing that this area is so "hot", the lease term is somewhat insignificant since it is nearly a given that the area will be drilled in a timely fashion. Just remember that you are in the drivers seat for negotiating power so get all you can in a great lease.
I believe we only own 5 acres each for a total of 20 between the four of us and this has been leased to Petro Hunt for the last three years. Now they are asking to lease it again. I guess they just have not gotten around to drilling it yet. They only offered $800 and 20% royalty. I told her that I knew that was way too low for this area and that I would check and let her know what I wanted.
r w kennedy said:
Since 900,000 plus barrels of oil have been pulled out of the spacing just west of you in less than 4 years by the 2 wells in that spacing, I would say you are in a good area. Considering the potential I would ask at least $4,000 per acre and 23% royalty with no deductions, if I would lease it at all. I'm amazed that an area that good is not drilled yet. Just curious, does you family hold a large acreage position and they just would not drill until they found you and got a lease signed ?
I just looked up my papers and this property was originally leased to Baseline in 2005 for a five year lease. At some point before the lease was up, it was taken over by Petro Hunt. Petro Hunt leased the property before that lease expired for a three year lease which does not expire until January 15, 2013. They are now asking for a three year lease. I am a little puzzled why they are asking for another lease when they still have six months left, but I guess it's because they don't have this on their drilling schedule. We only have five acres each for a total of 20 acres. This property has been held now for 7 1/2 years and nobody has drilled. I don't know what is going on.
r w kennedy said:
Since 900,000 plus barrels of oil have been pulled out of the spacing just west of you in less than 4 years by the 2 wells in that spacing, I would say you are in a good area. Considering the potential I would ask at least $4,000 per acre and 23% royalty with no deductions, if I would lease it at all. I'm amazed that an area that good is not drilled yet. Just curious, does you family hold a large acreage position and they just would not drill until they found you and got a lease signed ?
Julia:
Sounds like Petro Hunt top leased your minerals in which they took over after Baseline's lease expired. You are possibly correct in that this acreage is not on the schedule prior to 1/15/13 for Petro Hunt. You are also correct in that $800 is too little for this proven area. My suggestion is let your mineral lease expire and then market your minerals to other operators if Petro Hunt is unwilling to negotiate. Again, you are in a very good area and you should get top dollar for your lease. Your negotiation power is even stronger with an expired lease.
Julia Watters said:
I just looked up my papers and this property was originally leased to Baseline in 2005 for a five year lease. At some point before the lease was up, it was taken over by Petro Hunt. Petro Hunt leased the property before that lease expired for a three year lease which does not expire until January 15, 2013. They are now asking for a three year lease. I am a little puzzled why they are asking for another lease when they still have six months left, but I guess it's because they don't have this on their drilling schedule. We only have five acres each for a total of 20 acres. This property has been held now for 7 1/2 years and nobody has drilled. I don't know what is going on.
r w kennedy said:Since 900,000 plus barrels of oil have been pulled out of the spacing just west of you in less than 4 years by the 2 wells in that spacing, I would say you are in a good area. Considering the potential I would ask at least $4,000 per acre and 23% royalty with no deductions, if I would lease it at all. I'm amazed that an area that good is not drilled yet. Just curious, does you family hold a large acreage position and they just would not drill until they found you and got a lease signed ?
I heard back from Petro Hunt today. They said they don't do more than 20% with anyone and their top offer is $1800 an acre if we are interested in leasing. If we aren't interested at that rate, then they will just let the lease expire.
I would wait Julia, I have been paying more than 1800 an acre there.
Julia:
I would let the lease expire then market your minerals. My question is how many acres in this spacing unit does Petro Hunt hold? If they have a large enough holding, they might adjust their drilling schedule in lieu of negtotiating new leases. Again, I would sit still and let the lease expire as your negotiating power will be much stronger.
I am sure we will just let the lease expire. Thank you all for your advice. If anybody knows of anybody who would be interested in leasing this for $4,000 or $5,000 an acre, let me know. I would definitely be happy to do that.
Julia:
One scenerio that could play out is after the lease expires, Petro Hunt drills while you are unleased to anyone and you become a parcipiant in the well. You might want to study this situation as numerous posts on this forum deals with paticipation in a well.
Julia Watters said:
I am sure we will just let the lease expire. Thank you all for your advice. If anybody knows of anybody who would be interested in leasing this for $4,000 or $5,000 an acre, let me know. I would definitely be happy to do that.
We have one well that we are participating non-consent, but we are all getting older and it takes so long to pay out that we were thinking we would probably rather lease and get the bonus, especially with the small acreage we have on this one. We only have five acres each. The other well we have like that has been paying for two years and they told me that if it continues as it has been it will be another 31 months to pay out. Then it will take some time to make up the bonus money we lost by not leasing. If I was younger I would probably rather do that, but at my age I think I would rather get the bonus money.
The productivity of the well and the price of oil at the time are factors as to when a well will pay out. I have one that I'm pretty sure will pay out and retire the penalty in less than 1 year at 150 to 160k barrels. Field price of oil dropping to $75 a bbl may add another month, to the time I expect payout, but still less than a year. I'm enjoying my 16% royalty up to that point, about 75% as much as I would have gotten if I had accepted the operators last lease offer. I guess I could have accepted their offer of $100 per acre and 18% or the $3,000 and 20% I had negotiated it to in 2010, but I got tired of them.
You are probably right. The wells around there are doing 6,000 to 7,000 barrels a month. That's much better than the other well we are doing non-consent on. I think it's around 1,500 to 2,000 a month.