My wife owns 15 acres of minerals in sec 47: Block 4, H&GN Ry. Co. Survey, Reeves, County, TX.
She received a sizeable top-lease offer($2000/acre 1/4) from SWEPI LP. I'm not familiar with this company. Couple of questions:
1. If a well is proposed, do they have to let her participate in the well or can they cut her out of the unit?
2. Would she better her bargaining position by leasing to herself, then assigning all or a portion of the WI to the operator? Assigning only the pooled formations to the operator.
3. What kind of production is an average Bone Spring well doing initially and how rapid is the decline rate?
Any information would be appreciated. Thanks, Andy Means
From your questions, all knowledge is implied except the depletion in the formation. No, I do not know the depletion rate for the formation? I would ask $2500 and 5/16,
SWEPI LP is associated with Shell Oil . A top lease offer implies that there is a lease in place. Either situations preclude Items 1 and 2. All wells decline differently depending on geology and operator. I doubt that her lease will expire and if it does, she may have some options but only then. With the amount of bonus money mentioned, your you and your wife should seek some professional help. A little help now evaluating specifics may mean 10 times more money down the road. Contact Buddy Cotten on MRF.
Is the 15 acres an undivided interest in a larger tract? If not, and it is 100% of 15 acres, you do have to look at whether they can configure the well or wells to cut you out.
On decline rate, assume 75% by the end of one year and be happy with anything less.
Thanks for the comments. The 15 acres are part of a 320 acre tract. That being said, I guess it wouldn't seem possible for them to cut her out of the unit. Does TX have force pooling? If an agreement is not made are you forced to take their best offer or participate with your interest in the well? There is a paid website in OK (Pangaea Data) that tracks current leasing activity giving info like--legal, lessor, lessee, date, etc. Is there a website that tracks TX leasing in a similar way? I'd like to see if there are other companies leasing in the area that may want to compete for the lease. Much Thanks
Andy, if your wife owns full interest in a tract and they want to include it in the unit, she can probably participate in the well. If she owns a partial interest in a tract in the unit she should probably lease. The operator does not have to allow her to participate in the well if this is the case. I am active in the Bone Springs and Reeves County (as an attorney) and competition for leases is very active. Each situation is different and should be carefully reviewed before a decision is made, but most operators are drilling their leases even if they begin during the last few days of the lease, so a top-lease, if you get all the provisions you want, may not be a bad thing.
I'm not sure I know enough information about this 15 acres to may any real judgements; but, isn't there another way of "force pooling" without actually calling it forced pooling when talking about a block of acres within a larger block of acres. I trust that you are the expert here; but, what about "non consenting royalty owner" rule/law or what ever they want to call it. One additional thing that I heard when talking to two Oil men trying to lease one of my places. One of the oil guys said to the other oil guy " If you have a choice and you had to pick one of these, which would you pick? Working interest in a well or a DWI! The answer without hesitation was a DWI every time! Meant as a joke; but, each of them said that each of them felt the DWI was a better choice. Just food for though on Working Interest.
Wade Caldwell said:
Is the 15 acres an undivided interest in a larger tract? If not, and it is 100% of 15 acres, you do have to look at whether they can configure the well or wells to cut you out. On decline rate, assume 75% by the end of one year and be happy with anything less.