Price of oil paid to mineral owners

Oil and Gas Leasing Help
1

Can anyone explain how an oil company gets paid per barrel of oil per month? How far out is the price negotiated? Thank you. Ardis Till Jackson

2

Ardis, I can't tell you alot but from my experience with last years sharp dip in the price of oil, I received the same price I had been getting for more than two months so I never experienced the $60 ND oil last year, I think the contract ended when oil had climbed back up to $75. I'm sure the contracts can last at least 90 days, and probably longer.

Although industry people say that production is not cut when prices are low, most of my wells have produced less when the price was low. When the price rises, my production climbs sometimes 50%. It could be an accident I suppose, but I sure hope my operator is smart enough to take advantage of high prices and not overproduce when prices are low. After all, there isn't an unlimited supply down there that those particular wells can reach. If they would drill the needed infil wells I might feel different.

3

Thanks for your answer. I have been getting royalty money from Kodiak for a bit over a yr, Brigham, not so long, and I have never seen the price below $75. a barrel until this last check fom Kodiak. I always thought they contracted out 90 days, but it doesn’t seem to be as the price varies every month. From what I heard fom my landman, the price is low due to the fact it is hard to get the oil out of North Dakota as oil produced is way up. Anyway, just glad to be receiving royalties, no complaints. Thanks again—Ardis Till Jackson

4

Dear Ardis,

My family has had 320 acres in Wyoming now for over 120 years. For more years than I can remember leases have been for a 5 year stint each. Either renew or another company comes along and offers one.

Regarding the actual production of oil, the customary cut for the land owner is 1/8 or 12.5 percent. The company doing the drilling etc... picks up the tab for all expenses.

Let me put it this way; at 1000 barrels a day ( which is not excessive by any means ) out of one well, at $80.00 per barrel & 40% taxes you would be taking home approx $3000.00 per day. That is a ball park figure.

Have a great weekend,

Saml

5

Thanks for your reply, it is more involved than I thought, but very interesting.