We were approached by BLACKWELL ENERGY, LLC to purchase mineral rights to "Oil and Gas mineral interests within Weld County Co Township 8 North, Range 59 West Parcel # 053928000011. We were offered $2000 (one price) to sell - knowing that this area of Weld County CO has several oil wells in the area and is producing, how much would be a good offer to counter?
In this type of situation, I will respond with “This offer is not sufficient for consideration and evaluation. You may submit an increased offer that meets our evaluation hurdle.”
This will typically get no response since these offers are seeking low hanging fruit. They will try to contact you to fish for your number. If that happens, tell them submit the offer and you will respond accordingly.
2 Likes
If you are looking to sell, you might consider soliciting a few offers from well respected mineral buyers. If you believe your interest is worth a significant amount, an appraisal is also an option. Pecan Oil offers a tool to give you an idea.
More information would be helpful. What section are your minerals in? How many net acres? Is the offer per net acre or for all your interest?
1 Like
What section are you in? There are QUITE a few infill wells permitted in that area, so you need to find out more before you jump at selling. Buyers are quite aware of what your property is worth. This township is jumping with leasing and permits.
The offer is for $2000, one price, not per acre. There are about 16 acres involved and I would get 1/4 interest. The address is in Weld County, Township 8 North, Range 59 West Parcel # 053928000011.
We need a section number, not a parcel number to give you info on permits.
Township 8 North, Range 59 West
Section 28: E/2
You have seven permits just to west in 20/29/32-Civitas. You have seven permits to the south in 33-34 MDS Energy. You have six permits to the NE in 3/10/15-Bison Operating. 21/28 would be the logical pairing for future horizontal wells unless there is a geologic reason not to.
I am so new to mineral rights ownership, what exactly does your answer mean for me/heirs? Would it be a better decision to hold onto the rights or to sell them - and for what price per acre?
If your information is correct, you have 4 net acres. $2000 for all is a lowball offer. If you read the offer carefully, you may find that if you take it, you also sell any other mineral rights that you have in the area whether you are aware of them or not. .
You should not sell these rights. Look at the attached activity map. Drilling activity is offsetting your acres. It will come your way within the next couple of years your monthly royalty could easily be $1000 to $2000
Attached is
Let’s do a little arithmetic to illustrate what your interest is potentially worth.
Refer to the map above. The nearest production is the 3 section spacing unit in sections 20, 29, 32 which has 6 horizontal wells drilled from north to south. The information for these wells is available on the Colorado Oil and Gas website but they are located by the surface location in Section 17. These six wells total production averaged about 90,000 barrels per month for their first 6 months. At a conservative oil price of $50/ barrel, that is $4.5 million per month gross.
So what would your share be in these wells if you owned 4 net acres in the spacing unit: The spacing unit is 3 sections x 640 acres per section = 1920 acres. Your interest is 4 acres divided by 1920 = .0021. Your Net Revenue Interest (NRI) is your royalty percentage (20% is common) times .0021. So your Net Revenue Interest (NRI) is .0021 x .20 = .00042.
.00042 x $4,500,000= $1890/month.
1 Like
Hi, 20% is pretty unheard of in this area right now. Bev, is your acreage leased? If so the royalty amount will be on the lease. Happy to help you find that info if you want.
The State of Colorado collects a 20% royalty on their mineral leases in Weld County. I don’t know why a private mineral owner would take less unless they are already bound by an old lease.
Sell vs Lease, the right answer depends totally on your needs and desires. You will generally get money if you lease, especially if they actually drill and start production. But if a financial shot in the arm can boost you into a new business or career maybe less money overall now is the best answer.
I am on my 4th lease, the first three expired without any wells being drilled, this is over a 25 year period. A 20% royalty is certainly obtainable in the two areas I have leased T7N, range 67W and 63W. But that can vary depending on the bonus they pay as well.
Tim- you seem to have experience with leasing and I need help understanding a lease offer I received from Civitas about a well starting in Erie, CO. How do I decide if I should sign it as is, negotiate, or not sign at all?
Forced pooling affects your negotiations in CO. Take the time to review recent Oil and Gas Leases that are filed of record in or near your tract. This will provide you with royalty rates, time, and possible addendum options. In the cases where OGL Memos are filed, take the time to try and contact the Lessors and ask them to share their OGL terms. @Tim_Brough is correct that royalty rates only matter if a well is drilled, so consider that as a real factor in your negotiations. The size of your interest can also provide some leverage, or not for small interests, in negotiations. Reach out to other companies in your area to create a more active market.
The more work you are willing to put in will directly affect the resulting OGL. Good luck.
hollym: It is hard to give you advice without knowing what terms have been offered by Civitas. Your bargaining power also varies greatly depending on how many net mineral acres you own.
You should avoid force pooling in Colorado as it rarely works out as well as leasing unless the terms are just lousy. Force pooling is a mechanism whereby minor owners are forced to allow drilling under a set of rules in order not to penalize the majority of owners who have made a deal with the driller. Civitas has drilled many wells so I suspect that their terms are not bad. You also have the option of paying your share of the drilling and completion and having a working interest but these are expensive wells and several will be drilled at once. For example if you had 10 acres in typical 1280 acre unit and they drilled 8 wells at a total cost of $40,000,000; your share of the drilling cost would be over $300,000.
Thank you James. Where can I find recent O and G leases that are filed of record. A well is definitely being drilled, as the letter includes its budget. My interest is only .1900 net mineral acres.
Thank you - this is super helpful. I only own .1900 net mineral acres. I have the specific terms in the letter that includes the overall budget for the drilling operation however it says I am not allowed to disclose them to a third party unless I have retained them for consulting.