I have an offer to lease 22 mineral acres in Township 155 North, Range 100, Section 4 from Petrogulf Corp. at $1500 an acre, 1/5 royalty for 3 years. Is that a good offer or should I wait? Also on the GIS Map that section is a light green, does that mean anything? The land is now leased by Brigham until Sept. 2012. Is there anything else I should ask for in the lease? Thank you.
Fay: Looking at the GIS map, it appears that Brigham is currently drilling the “Shorty 4-9#1H” in this Section. Do you have a “pugh clause” in your lease? If not, your area will be HBP if a well is currently being drilled. Most likely, Brigham is in the process of locking in leases nearing expiration dates, such as yours. If a top lease offer was applicable in your situation, the offer of $1500/acre is low (in my opinion) but the % royalty is somewhat the norm. If you have any questions as to whether or not your current lease has a pugh clause, google this term and learn what it means; thus you should be able to identify it in your lease. Looks like you have a new well.
Dear Fay,
If Mr. Mallory is correct that your minerals are in a unit that is currently drilling, you will be well served to wait until your lease expires. Then check with Brigham to confirm your interest in the Shorty 4-91H well before taking action. You could avoid great problems by declining a lease offer at this time. Petro-Hunt is a good company but their land man may be working under contract and have no knowledge of the Brigham well or the terms of your current lease.
Ms. Donovan, the light green is only highlighting the section searched for. Good luck with your well.
Thank you all. Good advice.
I have to stop buying my eyeglasses at the Dollar Store. I should have typed Section 8. Is the advice the same as for Section 4? Also, what is a gas methane well? Any info will be appreciated.
Fay:
No permits pending on the area of Township 155 North; Range 100 West; Section 8. Wells just in the Section to the West of you but nothing pending in your area. I would start with $2000/acre; 20% royalty; 3 year lease. You might even go a little higher on the bonus as the area is definitely in a ‘hot’ vicinity. Take your time and shop around before signing.
Ms. Donovan, I looked at the production of wells around you and I would not settle for less than $3,000 per acre bonus. There are some very good wells near you. The L. Tufto well one space west of you has produced 108,000 barrels from June of last year to March this year, so 10 months. The well south of your spacing is even better. If one company won’t pay you this much, ask another, in fact ask several companies. Wells in this area can pay themselves off in a year, even if they pay you $3,000 an acre bonus and 20% royalty. Negotiate hard, but I don’t think it will be that hard if you get competing offers. Be sure to let Brigham know you are getting offers; I’m sure they do not want to lose your acres, I sure wouldn’t.
Charles & RW, thank you. You both are so knowledgeable on everything. We are so fortunate to have you and others in this forum.
Ms. Donovan, I find that Charles always gives good advice. I think I may be a bit more aggressive, but you will not get if you don’t ask, pointedly. I think you can do it and it is a significant amount. I think you deserve it. Stay away from the dollar store cheaters (reading glasses), and I like to have two sets of different magnifications. Sometimes my arms just aren’t long enough to bring the fine print into focus.
RW, I know, my arms also get shorter and shorter. I’m sure my age, 83, has nothing to do with it. I’m looking for any info about methane gas wells. I know nothing at all about them and one is being drilled on a site I have some rights on. Thanks again.
Fay:
I believe a methane gas well would be a natural gas well since the major component in natural gas is methane. Methane is produced underground by decomposing organisms and at times is trapped in shale formations.
RW I know, my arms also get shorter and shorter. I’m sure my age, 83, has nothing to do with it. I’m looking for any info about methane gas wells. I know nothing at all about them and one is being drilled on a site I have some rights on. Thanks again.
Fay, If I understand correctly methane is one of the lighter elements of natural gas and it seems that the heavier elements in gas are more valuable: natural gas liquids, propane and butane. The thing with gas wells is that they may be drilled and capped if they do not produce the heavier components, oil, NGL and higher energy propane/butane. I hope you have a good shut-in clause limiting the time they can keep your minerals stored in the ground. I think 2 years cumulative is reasonable as this would be in addition to the term of the lease. If the lessee can’t find a way to market your minerals in that time, there is no reason to let them hold your minerals longer. You sign leases for production not stockpiling. I also believe that you can demand more than the frequent $1 per acre per year shut-in royalty. $50 per acre quarterly may give incentive to produce your minerals and if not, it will at least line your pockets a little.
Fay Donovan said:
RW I know, my arms also get shorter and shorter. I’m sure my age, 83, has nothing to do with it. I’m looking for any info about methane gas wells. I know nothing at all about them and one is being drilled on a site I have some rights on. Thanks again.