Jimmy, I can’t tell you what to do, but can tell you that I won’t lease for anything less than 20%. The $100 is low and they may be trying to lease up as much as possible before prices start to rise. You could wait for the forced pooling. If you lease, make sure you have a no deduct clause in your lease. Before you lease, friend me and I can send it to you.
Just received Notice of Hearing for American Energy-Woodford. Relief sought: Horizontal Well Units. Section9, T18N, R 2E Payne county. My mineral rights are included in the notice. They want a change from 40 acre drilling and spacing units to 640 acres. Can anyone tell me (in a nutshell) what this means and what it could mean for me? There was surface drilling years ago but those were shut. Thanks for any advice or information
Jimmy, Currently, The Oklahoma Corporation Commission (OCC) requires 640 spacing for large gas wells and AEP/AEW drills for the gas. You are in a good gas trap area that runs west and south of you. AEW will hold your area by production until the massive drilling projects start, then they will increase density and drill as many wells (laterals) as they can as close as they can.
The article was written in June 2014 when everything was a lot more optimistic than it is now.
Am sure everybody including me is patiently waiting for a price recovery whenever that might be.
Linda
Jimmy, The answer to how long is difficult. Continuous petroleum accumulation can last as long as they can encourage the formations to give up the basin’s hydrocarbons. Schlumberger’s definition: "The areal extent of a continuous reservoir, such as a shale reservoir, can be as large as the extent of the sedimentary basin in which the shale was deposited."
And, the sedimentary basin is The Anadarko Basin which is like a large deep sea of hydrocarbons and Payne Co is on the shelf of the basin. Oil and gas migrates from the basin. They drill our area because the traps are not deep, so it costs less and is less problematic.
http://www.glossary.oilfield.slb.com/en/Terms/c/continuous_reservoi…
Linda, Our area is one of the most economical areas in the US to drill. Like Bob reported, Exxon and Chevron have abandoned deep water to drill the shale in OK and TX. Right now, they are betting the low prices will bankrupt smaller companies and they can take over their operations. These big companies are politically powerful, aggressive and are controlling the price of oil so that they can capitalize on it. IEA World Energy Outlook will be released Nov 10 2015
Thanks ladies! Martha, just went by the house and checked mail. Got a letter and offer from AEW. They offered (1) Lease $200/acre + 1/8th (2) $150/acre + 3/16 and (3) $100/acre and 20%. I’m thinking #3 is my best bet. Your take on it?
Thanks much
Today, Oxy Petroleum announced it is selling all it’s Bakken holdings and non core assets in the Middle East and Africa to concentrate on the Permian Basin in TX. The Bakken has become to expensive. TX and OK are less expensive to drill, so hopefully we will see increased activity.
Jimmy, If a producing well is drilled in your 640 it will be divided by all the mineral owners in the 640 by % of mineral acres owned. Your net royalty interest is in proportion to the number of acres you own in the unit multiplied by your fractional interest. Example of a 640 acre unit and you own 80 acres and have 1/4 royalty (20%): 80/640 = 0.125 x .250 = .03125 is your net royalty.
Jimmy, I figured your 5 as 80 so your net royalty is: 5/640 = .0078125 x .250 = .001953125
Thanks Martha
Kind of took a little wind out of my excitement BUT I guess getting .001953 of the entire section is better than getting $0 if they hit anywhere outside my 5 acres in the 80 acre parcel. Correct? And I assume that if the first well is successful and they drill in another part of the section, I’d get .001953 of that well too?
Good morning Martha
Quick question. With American trying to establish 640 acre drilling instead of 40 in Sec 9, T18N R2E will that reduce any royalties if they hit outside my 5 acres of an 80 acre portion at E/2 SWE/4? Thanks Jimmy
Jimmy, Yes, increased density is good. 2 wells is great news and also means you will most likely get more than 2.
Jimmy, You might not have to fork out 7K per well. Several laterals can be run from the existing well bore and each lateral counts as a well and they can walk the rigs cutting rig time. Still, figure 7K and you should be alright on each well. The best part is that once the first wells come in you use that income to pay for the rest.
Jimmy, food for thought. You have a .001953 interest in a 640 spacing well. Payne county wells were costing between 3-4 million to drill before the downturn. With the reduction in revenue company’s are tightening the strap when it comes to drilling their wells and costs. So let’s say 3.5 million is a safe number. A .001953 interest in a 640 spacing is roughly 7K dollars. I don’t know where you are financially but a 7K investment for a potential return that could be monsterous is a no brainier for me. Why let the big boys take 75 percent of your money because that’s what they do when they lease your minerals. Of course there is a risk but the groundwork has been laid in Payne county. Martha is by far more experienced in this area, but for 7K I would jump on it.
Jimmy, Sorry I can’t type and eat Lays potato chips at the same time. LOL! I meant to type: You can call upon geologist M Barnes. In the mean time, don’t let anyone talk you out of selling land or minerals.
Actually, I was 5. LOL!
Jimmy, I totally understand that 7K is a lot of money but consider all options before you sign a lease? Do you have sons or daughters or family members that you could pool your money with? There are a multitude of options out there so at least explore them.
Jimmy, You have a mineral ownership in that well based on your % ownership of the 640 acre unit and if the first well is drilled in that 640 unit and you will have the same ownership of the next wells as long as they are drilled in your unit. The drilling unit is also known as the spacing unit. Here’s some info that will help you. NOTE: I don’t recommend the Law Firm who wrote this article, but it’s good info.
http://www.basslaw.net/site/news_articles/oil_and_gas_basics_drilli…