OK Bonus-Royalty

[EFONeill]

Hi There! This is my first post on this forum. Our family owns ~ 90 net acres in Section 14-17N-07W in Kingfisher County, OK. In August, 2019 all family members signed 2 year extensions for our acres for $3150/acre, 3/16 royalty. Original 3 year term, signed in 2016, paid $2500/acre. We signed with Newfield on both the original 3 year term and 2 year extension. A different contract company for a different driller, Chaparral Energy, is now offering $600/acre, 1/5 royalty for a new 3 + 2 lease agreement. I’m researching for all 9 family deed holders and don’t want to make a mistake.

Is this drastic reduction what others are seeing in this area? He said it’s due to the bottom falling out of the industry re Covid, etc. and drillers just aren’t paying that much any more.

Thanks so much!!

[TODD_M_Baker]

Basically that is correct. Bonus prices are 100% depended on competition.

[Archie_Smith]

Unless you can best use the cash now, you can also wait for a potential pooling order. I have found pooling to be reasonably generous in OK, plus if you are the only holdout preventing Chaparral from drilling they may offer more to avoid going through the cost of the pooling process.

[M_Barnes]

Personally, I would not do an extension if you choose to lease because a whole lot can change in 5 years, sometimes for the better, sometimes for the worse. A lease would tie you to three years without the extension. A pooling can be six months or a year.