I have received an offer for a one year option on my mineral rights in Gaines Co. The offer was for$32.00/ mineral acre. Is this a reasonable offer?
Thanks
Dennis W. Wright
Not even close when you consider that buyers who know risk assessment, are paying 50 to 100 times that amount in structured closings today depending on location. West Texas is in a whole new ballgame as far as the new oil business is concerned. In my opinion, you are giving the optionee way to much leverage to flip for big profits at your expense.
Gary L Hutchinson
Minerals Managment
Lease or purchase? Gary is correct on price. Plus, an option to lease is usually a lease flipper trying to tie up your property and make a profit.
Hi, Dennis!
I wouldn't sign Toilet Paper for $32.00 per mineral acre.
Who is it that has made you such a ridiculous offer? You should share that kind of information with the other people here on The Forum.
If you will tell post the legal description(s) to your lands, I can ask a few friends what a fair Leasing Bonus Rate or Per Acre Sales Price is in your area.
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Lawson Schulz, landman
Lumberjack Energy, oil company
Section 10, Block A-22 Gaines County School Land in Gaines Co.
I'll ask around, but what price are you looking for: To Lease or to Sell?
Lease only, what ever the going rate is. Thanks
When I entered the A22 and 10 in the RRC Map Viewer*, no return was given. I went to GLO map viewer** and found A22 Sec 10 Abst 1576 Public School Land.
Make sure the language of any option you sign requires the lessee to lease all your minerals, not just the fraction the company determines it needs to complete a well as you might be disappointed when the bonus you were expecting based on all your mineral acres turns out to be only a fraction of that. The language allowing this partial leasing is not necessarily written in plain English. If you do go with an option, I would think you would want to dramatically decrease the length of the term to three or four months while increasing the $/acre. If you would not sell your home without using professional services to make sure the transaction is proper, it is probably not a good idea to move forward with DIY oil and gas law, so you might want to seek out someone with expertise to make sure that you do not fall victim to a "Producer's Lease" or somehow unintentionally convey/sell your holdings. Caveat "Lessor"
Thanks sounds like good advice.
Dennis -
Attached is a packet of information I have pulled up on your lands in Gaines County.
It appears the AJ is correct in that it is Section 10, Block A-22 of the Public School Lands Survey that just happens to be located in Gaines County, rather than the Gaines County School Lands. The Information Sheet from the Texas General Land Office (GLO) appears to match up perfectly.
There are Gaines County School Lands just to the East of your Block A-22, but the Sections included in those Surveys are only 1 through 9.
There are hundreds of producing wells near your lands (or reasonably near your lands), but for the most part those are included in various large Units, such as Secondary Recovery Units where they inject water or CO2 in the outer Wells to push the oil and gas towards the center Wells. Most of those wells are many years old.
The one Well drilled in your Section and the few immediately surrounding is were all Dry Holes (no commercially viable production found). They were all drilled back in the 1950's.
I have included a map and table of 9 Wells that are to the southwest of your lands that have been drilled, are currently being drilled or have recently been permitted. 8 of them are horizontal Wells, one of them (the Harris 3R No. 1C) is a conventional Well.
Some of these were permitted as recently as within the past few weeks, so congratulations, somebody is interested in the general area!
There does not appear to have been much interest in leasing in your Section or to the north or east of it. There may be some geologic reason for that, but you still appear to be in a potentially good area.
I have emailed three Landmen that I know that are active out in West Texas about Lease Bonus Rates. I have only heard back from one of them so far. He said that as of about 5 months ago companies were paying $2,000.00 per acre, but he didn't say where that was.
I will let you know when I hear back from the others.
Hope this helps -
Charles
PS: One other small item I should mention is that your lands were Patented in 1948. I will check with the GLO tomorrow, but there is a possibility that your minerals were reserved by the State.
768-DENNISWRIGHTINFOGAINESCOTX.pdf (413 KB)Charles, thanks for your generous reply. My Mother has a lease in 1997, the well was ARI # 421650258300 apparently a dry hole. I have an application for a spacing exception permit from Parallel Petroleum LLC. dtd 12 Mar 2012. I haven't followed up concerning royalties due me for the spacing.
Scan and attach those papers. I'll see if you have any royalties due.
Are you sure it is the same land?
Are you sure that is the correct API Number? When I searched for it on DrillingInfo, nothing came up.
I found 994 producing wells in Gaines County with someone named Wright in the related Mineral Tax Rolls. What is your full Mother's name?
What other possible names could the royalties be under?
Dennis -
Please see the attached.
One of the other Landmen that I asked about Leasing Bonus Rates is working in Reeves County, TX.
He said that per Net Mineral Acre Bonus Rates there were between $1,000 and $3,000 per acre.
Gaines County is a few counties north of Reeves and the actual area where your lands are located will, of course, dictate what you can expect, but between the $2K figure I sent you earlier and my second friend's $1K to $3K figures, you should be able to garner the range of Bonus Payments you should expect.
Hope this helps -
767-TXCoMap.pdf (428 KB)Thanks, considerable difference. I think the offer for lease was $150.00/mineral acre.
Mr. Wright, You might find the April 2016 Ring Energy presentation with information on San Andres horizontal development and economics interesting: http://ringenergy.com/Other-Presentations/Augustus_Roadshow%20Prese...
I believe drilling has commenced/been completed on two of Ring's hz wells in the last few weeks.
AJ,
If you will download the attachment I sent to Dennis, you will see in Item 06. that Ring Energy's Harris 3R No. 1C, which is a conventional Well and their Augustus No 1H are listed as "Drilling In Progress".
If they have been completed that would be great! I hope they are both Barn Burners.
I did see view your attachments, Mr. Tooke. I closely follow Ring Energy and have known about the horizontal program for some time. I learned about one of the wells in Ring's latest earnings call last week, but it was not immediately viewable on BH rig count app. There are other wildcards* which I believe could make acreage southeast of Seminole increasingly of interest to operators. You can also see that Double Eagle has leased up a number of sections and that Christensen and HL Brown have permitted deeper targets. What do you think of the performance of Texland's "Moriah" lease?
*
ROZ Pay Zones: http://www.rrc.state.tx.us/media/20095/8a-87578-frl-pfd.pdf
200' = 10 MMBO recoverable oil / section using CO2 flood
400' = 19 MMBO recoverable oil / section using CO2 flood
Kinder Morgan's "Tall Cotton" greenfield ROZ project in Gaines county is projected to ramp up to 1600 bopd in 2016. This is from a small pilot project of less than 200 acres. "Tall Cotton" is a C02 flood which never had any primary production. It does require a lot of capital and a reliable supply of C02, but "Tall Cotton" is economic at lower oil prices. KM projects that a very significant amount of its production will come from "Tall Cotton" in the coming years. A very large part of Gaines county is highlighted on an ROZ fairway map I found online. ROZs under existing production are know as "brownfields". Not all ROZs can be commercially produced, Productive, profitable ROZs are a subset with certain characteristics. The hunt is "ON" for ROZs in Gaines and elsewhere!
This "cookbook" was published May 2016 and offers details on how companies can identify economically viable ROZ formations: http://www.searchanddiscovery.com/documents/2016/51259trentham/ndx_trentham.pdf
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This is a link to a daily drilling completion report for a re-entry just south of Seminole. The well seems remarkable in that it had a 480 bbl 24 hr IP and is responsible for the designation of the Nickell (Wolfcamp) (65481500) field by the RRC. But RRC production reports seem to show that the well has produced only 558 bbl of oil since Nov. 2015. http://commodityconsultingllc.com/files/5814/3101/1147/Wright_1_--_Completion_Report_5.7.15.pdf
I don't follow the area very closely, but your information is interesting.