I Was force pooled in a section of land In Grady County OK where I was hoping for a little bonus money and bigger royalty....Well this did not happen got the same they offered across the board when doing the leasing!! I have really been thinking of participating in the drilling..Has anyone here on the forum participated?...Was just trying to weigh the invesment vs return ,,,The Well is going to be 2.3 million 640 acre unit Horiz frac into woodford....So per acre part would be $3593.75 an acre give or take a little.... Would the up front costs be worth the 100 royalty payment on 5 acres? for almost 20k and how long /if production is made would it take to start seeing a return over the investment?
Here is how I figured the return on participating in wells in my area (Marshall and Johnston Counties OK). My first help came from the Oklahoma Corporation Commission website. They have an article on participating. They said that on average the cost of operating a well takes 30% of the proceeds from the well. This is an average and depends on the price of natural gas, but unless you can find better information surfing the web, you might as well use it. So basically your royalty from participating is not the full 100% of the production. You can download a program from the OCC website that allows you to see the actual production data on wells near your well. The Oklahoma Geological Survey website also has articles on typical or average production of Woodford wells, which varies from basin to basin, but which used to average a million cubic feet per day after higher production during the first year. You could also search for "Brian Cardott." He is the brilliant expert on the Woodford that has written several of those articles. The gas companies have gotten much better at fracturing the Woodford ("fraccing") and have gotten better at selecting wells to drill that have higher oil content, since oil prices are up and natural gas prices are down. So some wells produce ten times as much as the long-term average the first year, while others produce only double the later steady production during that first year. You can go to the US Department of Energy website and look for the weekly natural gas update. It has information on current prices and discussions on where the price may be going. So with this information you can do some calculations on what your return might be. In my own case, I think I will get my investment back in at the worst case 6 years. That is better return than I can get anywhere else and these Woodford unconventional wells are expected to last at least 20 years, possibly more as technology improves. So I made the decision to participate as much as I had money to do whenever given the chance. Your participation is a third the cost of mine so that will help your bottom line as long as wells in your area product the average. If there is a relatively high amount of oil that will help too. But there is on average a 5% chance that the well will never produce and your lose all your participation money. And as a participant you are liable for damages due to the well, so it would be a good idea to put those mineral rights into an LLC or S corporation, so that costs money for the attorney and filings. So good luck on your research, and do it fast, as the deadline for selecting participation was only 20 days for one of my forced pools. Read the pooling and spacing order carefully for the deadline that applies to you and for where you send the check. And make sure you give them your e-mail and USPS addresses so they will send you the well logs and other information on the drilling and fraccing. Sorry to be so long-winded but there are a lot of things that factor into making this decision.
So when you are force pooled, do you still get a signing bonus?
Dear Cooper and Mr. Stamps,
In Oklahoma, the average LOE (Lease Operating Expense) will range from 185K per year to 525K, depending on depth, for an oil well.
I attached an excel file that shows all the average costs.
Thank you Mr. Cotten, that is excellent information.
I have corrected the spelling on your name three times and it keeps showing up wrong. I apologize.
Ms. Web, the OCC governs what offers are made in the pooling and spacing order, and the ones I have seen have various levels of royalty and bonus combinations. The lower the royalty, the higher the bonus. I have also received outside offers from investors who know the well is going to be drilled and who want as I want to participate in wells as much as possible, but there is not much time for those investors to get their leases. But they offer more bonus for the same royalties in the pooling orders. So yes you can still get bonus money in a forced pooling. It is your decision, but I recommend that you run the numbers over the long term (20 years at least) before you trade immediate money for long term income. Unless gas never goes back up in price, royalties are worth more than bonuses over the life of the well.
Buddy:
You seem to be a resident expert, so I ask you:
Suppose A sells to B & reserves the minerals "together with all rights incident thereto for a term of 20 years, or if mineral production so long as production continues, but upon the expiration thereof the interest shall revert to and be vested in the Grantee herein, his heirs, successors and assigns"
And then within the 20 years B sells to C but "excepted from this conveyance, and reserved unto the Grantor herein, and the other record owners thereof, forever, all of the oil, gas and other minerals, in and under and that may be produced from said land, together with all rights incident thereto, it being understood that this conveyance is a conveyance of the surface only."
Later, but within the 20 yrs, B dies intestate leaving D & E as equal heirs
Then the 20 yrs expires w/ no production.
Who now owns the mineral rights?
Buddy Cotten said:
Dear Cooper and Mr. Stamps,
In Oklahoma, the average LOE (Lease Operating Expense) will range from 185K per year to 525K, depending on depth, for an oil well.
I attached an excel file that shows all the average costs.
Best,
Buddy Cotten
BBA-UT-PLM
Dear Dillon,
If I were running title based on your set of facts, I would buy a lease from D & E.
Dillon said:
Buddy:
You seem to be a resident expert, so I ask you:
Suppose A sells to B & reserves the minerals "together with all rights incident thereto for a term of 20 years, or if mineral production so long as production continues, but upon the expiration thereof the interest shall revert to and be vested in the Grantee herein, his heirs, successors and assigns"
And then within the 20 years B sells to C but "excepted from this conveyance, and reserved unto the Grantor herein, and the other record owners thereof, forever, all of the oil, gas and other minerals, in and under and that may be produced from said land, together with all rights incident thereto, it being understood that this conveyance is a conveyance of the surface only."
Later, but within the 20 yrs, B dies intestate leaving D & E as equal heirs
Then the 20 yrs expires w/ no production.
Who now owns the mineral rights?
Buddy Cotten said:Dear Cooper and Mr. Stamps,
In Oklahoma, the average LOE (Lease Operating Expense) will range from 185K per year to 525K, depending on depth, for an oil well.
I attached an excel file that shows all the average costs.
Best,
Buddy Cotten
BBA-UT-PLM
Buddy:
Thank you ever so much. That's what I thought, but wanted a confirmation.
We own mineral interests in small tracts in Fayette, Washington, Colorado & other counties but have some problems.
This is a tougher one.
I understand some states have a "race to the courthouse" so that if an old codger sells lot 19 in his subdivision to A and forgets doing so & later sells the same lot to B & B records first, then B has title.
I forget what it's called but I believe Texas has a modification of the rule & as I understand it - even If B records first, if he has knowledge of A's deed, & A records later, A can still knock B out of the picture. (As I understand it, this also applies to creditor claims which is why I suspect it's on the books)
Now, in our example, we had a relative, desperate for cash, let's say A, who sell his 20 acre mineral interest in Fayette County to B. A's future heirs C & D are at home at the time & know B is a friend of A from Fayette county but they don't recall his name now, if they ever knew it. B does not record the deed. A dies & C & D become his heirs. E now approaches C & D about buying the mineral rights. C & D would feel guilty about not telling E about B as even though it's been 15 years because they dont believe there is a Statue of Limitation on recording & sometimes people come out of the woodwork when money is forthcoming'
I know mineral value is often difficult to estimate, but generally, how much do you think an intrest such as this, which could bring foth a lawsuit, should be discounted on a sale?
Buddy Cotten said:
Dear Dillon
Buddy Cotten said:
Dear Dillon,
If I were running title based on your set of facts, I would buy a lease from D & E.
Best,
Buddy Cotten
Dillon said:
Buddy:
You seem to be a resident expert, so I ask you:
Suppose A sells to B & reserves the minerals "together with all rights incident thereto for a term of 20 years, or if mineral production so long as production continues, but upon the expiration thereof the interest shall revert to and be vested in the Grantee herein, his heirs, successors and assigns"
And then within the 20 years B sells to C but "excepted from this conveyance, and reserved unto the Grantor herein, and the other record owners thereof, forever, all of the oil, gas and other minerals, in and under and that may be produced from said land, together with all rights incident thereto, it being understood that this conveyance is a conveyance of the surface only."
Later, but within the 20 yrs, B dies intestate leaving D & E as equal heirs
Then the 20 yrs expires w/ no production.
Who now owns the mineral rights?
Buddy Cotten said:Dear Cooper and Mr. Stamps,
In Oklahoma, the average LOE (Lease Operating Expense) will range from 185K per year to 525K, depending on depth, for an oil well.
I attached an excel file that shows all the average costs.
Best,
Buddy Cotten
BBA-UT-PLM
buddy -- sorry -- i guess i first posted in wrong spot
Thank you ever so much for reply. That's what I thought, but wanted a confirmation.
We own mineral interests in small tracts in Fayette, Washington, Colorado & other counties but have some problems.
This is a tougher one.
I understand some states have a "race to the courthouse" so that if an old codger sells lot 19 in his subdivision to A and forgets doing so & later sells the same lot to B & B records first, then B has title.
I forget what it's called but I believe Texas has a modification of the rule & as I understand it - even If B records first, if he has knowledge of A's deed, & A records later, A can still knock B out of the picture. (As I understand it, this also applies to creditor claims which is why I suspect it's on the books)
Now, in our example, we had a relative, desperate for cash, let's say A, who sell his 20 acre mineral interest in Fayette County to B. A's future heirs C & D are at home at the time & know B is a friend of A from Fayette county but they don't recall his name now, if they ever knew it. B does not record the deed. A dies & C & D become his heirs. E now approaches C & D about buying the mineral rights. C & D would feel guilty about not telling E about B as even though it's been 15 years because they dont believe there is a Statue of Limitation on recording & sometimes people come out of the woodwork when money is forthcoming'
I know mineral value is often difficult to estimate, but generally, how much do you think an intrest such as this, which could bring foth a lawsuit, should be discounted on a sale?