Recent offers in Sections 25, 30 and 31 in Grady County

My wife and her family have mineral rights to approximately 165 acres located in sections 25 and 31, in Grady County, OK. They recently received offers from 3 companies and are wondering if these offers are reasonable and fair.

  1. $1500 and 1/5th (offered for both Sec. 25 and 31) **This will obviously not be accepted.
  2. $1650 and 1/5th (for both sections 25 and 31)
  3. $1750 and 1/5th (This company only considers section 31)

The family made a request for a 1/4 royalty, but all three companies stated they will not consider this amount at this time.

My understanding is there has been recent activity with the wells in these sections, which may be why they were recently contacted by the three companies. The family really wants the 1/4% royalty and would negotiate the bonus as necessary to get the 1/4%. What would be a reasonable counter offer? Also, how can they negotiate with company #3 to consider both 25 and 31 sections?

Thanks for your help. Pat Cosentino

You need to give the township and range as there are many 25 & 31s in Grady.

Sorry for not sending complete information. Here are the details you’ve requested.

  • 25-9N-8W
  • 31-9N-7W Thanks again for your help.

Pat Cosentino

Lease offers are not public data. So the fact that you have had three offers does give you a fairly good range of what the competition is in the area. Some areas do not warrant 1/4th in this current climate. Those three offers suggest that no 1/4th is available at this time. The other indication is the pooling orders in the eight contiguous sections, Citizen just pooled section 24 for $1500 1/8th, $1000 3/16ths, $500 for 1/5th, so your current offers are higher. No 1/4 was offered at the pooling. If a company cuts a multi tract deal, they do not have to report it to the judge. Might be why you are seeing slightly higher offers. Many of us would take the 1/5th or be happy going to pooling.

The clauses in the lease are much more important than the bonus amounts. The draft leases that you will receive are very likely not in your favor. Strongly recommend that you get an oil and gas attorney to review the draft lease and make recommendations and edits. You do not want post production charges in your lease.

Citizen Energy III already had permission to drill the NORPO 1H-25-24 well in 25 & 24-9N-8W. That well has already spud and been completed. Wonder why you were not leased ahead of time. The surface location is in 30-9N-7W. This well went online 6/1/22. So something is strange that you are not leased yet. I would take the 1/5th since the well is successful.

Camino and Citizen are all vying for 31-9N-7W. All have filed for various OCC cases. The hearings are scheduled within a few weeks time. Both have pooling hearings on August 15 scheduled.

Thank you for the information and your advice. I will strongly encourage the family to follow up with an Oil and gas attorney.

Does look like Winward Non Operating LLC and BLSD NON Ops WI LLC have filed leases at 1/4th in section 25 in April 2022. So there are at least two out there.

Hi Ms. Barnes:

Somehow I think I posted this without completing the email. (sorry!)

I was asking in question (4) about this letter regarding the purchase of my interests in Section 25, and the letter states:

“$3500 per net mineral acre based on a 3/16th royalty”

So does that mean their purchase price offer of $3500/acre is based upon my current lease agreement (if any) so that if my royalty is higher than 3/16 they would potentially pay more than $3500/acre and if my royalty is lower they’d pay less? Or have I totally misunderstood their offer…

Thanks so much for your time and attention! I appreciate your input.

Sounds like you received a generic form letter offering to buy, so if you have greater than 3/16ths, you may get more, less than 3/16ths, you may get less. These letters often go out in bulk. Since you have a production well and more on the way, that is why you have letters to buy. In my experience, letters to buy have been for less than the value of the wells.

Good Afternoon, Ms.Barnes,

I am the mineral interest owner my husband had referenced earlier in your email communication chain. Thank you so much for the information you have provided, it has been very helpful! Your responses prompted a few more questions regarding *25-9N-8W and * 31-9N-7W. I shared the info you gave with my family members and I was (we were) hoping you could help again by answering a few more questions:

(1) Can you please explain why you say, “many of us would be happy going to pooling”? I don’t understand why it might be a good idea to wait until pooling. I thought if you waited until pooling, they would just pay the lowest bonus and lowest royalty they could. Is there a different experience?

(2) Would you suggest we contact the various companies vying for the leases of these two sections (25 & 30) in a group email to them and tell them our highest offer and see if we can have them compete against one another. If not, what is your suggestion?

(3) Also, you said, “Camino and Citizen are all vying for 31-9N-7W. All have filed for various OCC cases.”

(a) Since they have filed requests for pooling in section 31, and I (we) also own interests in section 31 which I believe are currently under lease with Citizen, does that mean they are able to operate under my (our) existing lease without paying new or additional bonuses for a new directional well or wells under this pending pooling request? (b) And if we are entitled to something additional, how do we go about getting it?

(4) I got a letter from a company back in June stating they wanted to PUCHASE my inerests in section 25 fo more than double what is now on the table from these other companies. I sort of disregarded it because it clearly states “purchase” rather than lease. However, what I am confused about is that the letter states:

  1. Can you please explain why you say, “many of us would be happy going to pooling”? I don’t understand why it might be a good idea to wait until pooling. I thought if you waited until pooling, they would just pay the lowest bonus and lowest royalty they could. Is there a different experience?

At pooling, the operator is supposed to offer the highest bonus/royalty options that have been offered in the contiguous eight sections and the current section in the last year. Also, the pooling is only for the reservoirs listed, so you are able to lease or pool above or below those zones separately. A lease is usually for three years. A pooling is for six months or one year. Poolings usually offer two-four options of bonus/royalty options. In some rare cases, I have been pooled, time ran out and they pooled again, time ran out again and they pooled again, so I received multiple bonuses in several years instead of only one bonus. If I cannot get a good lease with mineral owner favorable terms, I frequently go to pooling. My opinion

  1. (2) Would you suggest we contact the various companies vying for the leases of these two sections (25 & 30) in a group email to them and tell them our highest offer and see if we can have them compete against one another. If not, what is your suggestion?-

You can do that. If you do, then you had better be ready with a family lease that has been reviewed by an attorney and each member be ready to sign. Their draft leases will likely not be in your favor.

  1. Also, you said, “Camino and Citizen are all vying for 31-9N-7W. All have filed for various OCC cases.”

If you already have a lease that covers the zones about to be drilled and your names are not on the pooling case, then you are held by previous leases and the terms remain. No new bonus.

(4) I got a letter from a company back in June stating they wanted to PUCHASE my inerests in section 25 fo more than double what is now on the table from these other companies. I sort of disregarded it because it clearly states “purchase” rather than lease. However, what I am confused about is that the letter states:

Offers to buy often go out in bulk to many hundreds of mineral owners when there are pending wells. Offers are generally for the known producing wells projected value and some discount factor. Most companies do not pay for future wells. Bonus amounts and sales amounts are completely different but are related to the royalty amounts. I scan them and put them in my files but ignore them since we do not sell our minerals. We want the profit from those future wells and are willing to wait for them.

Martha, please clarify "pooling good for six (6) years.

Does that imply after six (6) years a new lease is in Order, whether or not the Well is producing?

Tks John Morgan

I have never heard the term of six years with a pooling. Where are you getting that clause from?

In my experience, an OK pooling that is drilled on and has production is good until the production ceases under the terms of the pooling. As long as a well is producing or subsequent wells are drilled under proper increased density and in the reservoirs mentioned in the pooling, they can go on for decades. I am held by some poolings my grandfather signed decades ago.

The original pooling documents usually have a time frame on them of either six months or one year in which to drill. If the time frame expires with no drilling, the pooling expires or they have to get an additional order to extend the time. A few of the orders during Covid had some extra time on them due to rig and crew shortages.

Thank so much Ms. Barnes, you have been so informative. Is there a way to know whether or not your lease has expired? As stated earlier, I have an interest in section 30, and have not received money or contact of any sort in years (since my father passed in 2016). However, someone told me that my interest in section 30 is currently under a lease. How is it possible for a company to hold the lease when it is not producing and when you’re not getting any royalty from it at all in years? Can that happen?

Thanks again, Mrs. L. Cosentino

Please include the complete description that goes with “30”. Without the township and range, I do not know where to look.

Good Morning Ms. Barnes,

You had asked me for a better description of section 30. It is 30 Township 9N Range 7W. Hopefully, this is what you need.

Thank you, Mrs. L. Cosentino

The OK Tax site had the Ralph Jacobs 1-30 (Last production Mar 2020) and Ralph Jacobs 2-6 (Last Production Mar 2005) wells with no production in the last 12 months. It would appear to me that you were unleased after March 2020.

They list the Norpo 1H-30-19 coming online as of 5/31/22. Citizen Energy III LLC filed a pooling on 5/18/22. They should have been leasing before that well was drilled. The pooling should have been filed before the well was drilled. I only see one lease filed as of 5/12/22. Citizen had Horizontal, Location Exception and Increased density cases filed in December of 2021. The well was spud Jan 8, 2022. I see your last name in the respondents list for the Increased Density hearing.

You need to contact Citizen Energy. If you did not contact them when your father passed away and provide the correct title documents, they would not be able to find you to pay you. CITIZEN ENERGY III LLC 320 S BOSTON AVE STE 900 TULSA, OK 74103-3729|

You may have royalties in suspense. Or they might have been turned over to the state. I do not think you were leased for the current well, but you need to take that up with them. They have a pooling filed, but no orders yet, so get in touch with them immediately.

The JACOBS 30-9-7 1MH was completed in October 2018. The well’s surface location was Section 31-9N-7W. You should be getting royalty checks.

You need to search for your dad’s name in Oklahoma’s Unclaimed Property… and your name maybe…

https://www.oktreasure.com/

Thanks for the suggestion Don. This is a great idea!

Mrs. L. Cosentino