Just received an offer to lease my small acerage in Reeves, 3000.00 acre, 3yr/2yr option, 25% royalties… acreafe is blk 57, sec 34, T1. Any opinions on lease amount… offer is from BHP Billiton. Landman stated will be drilling within 2 years but take that with a grain of salt unless someone knows…
Susan - 3k is becoming the new norm. Ask for $3500 and you will probably get it. 4k is possible also because your acreage is right in BHP’s fairway. Let us know if you get it.
Thanks Wade, that is what I was thinking… will let you know!
Paul, I did ask for 4k and got the 3500 offer up from 3k.
Congrats!
I wonder what acreage is being leased for at the Eagleford play? What’s the difference?
Now the offer has been upgraded to 3500.00 acre! Thanks for the advice! Will keep you posted!
Susan, if they upped it to $3,500 without your asking - that should tell you something.
Yes, Paul, there is a permit to drill. From your text I assume that the permit falls under actual drilling operations. Did you make any attempt to question or circumvent the operator?
The post from Stephen, on the other hand, indicates that it must be spudded, not just permitted.
Stephen, are you saying that unless the well is spudded prior to termination of the primary term that the lease expires regardless of what work has been done on the well, such as site prep and permit? M A Smith, we did not question it since well pad was built and we could see online that the rig was slated for our site plus we had a contract for seismic monitoring with third party. I researched RRC site at the time and could find nothing that well must be spudded prior to termination of primary since we had similar language regarding lease. Sounds like question for attorneys.
Paul,
I’ll defer to Wade Caldwell but it is my understanding that unless they are actively drilling, they can’t hold the lease. setting a rig out there and just letting it sit does not hold a lease, a permit does not hold a lease, creating a pad site, does not hold it. They have to be engaged in the act of drilling a well and then completing it.
As I said, I defer to the legal department beyond that.
Does the following text mean that the operator can maintain the lease even if the well is not spudded prior to the end of the lease?
Notwithstanding anything else herein to the contrary, if at the end of the primary term, Lessee is then engaged in actual drilling operations or within 90 days of the end of the primary term Lessee shall have completed a well, temporarily abandoned, or plugged and abandoned a well during the primary term, this Lease shall continue in full force and effect for so long as Lessee diligently prosecutes the actual drilling of the well or wells and not more than 180 days elapses between the completion of one well and the commencement of the actual drilling of a subsequent well.
A well has to be spudded prior to the expiration of the lease. The gist of the quoted paragraph refers to the continual drilling requirement after the primary term has expired.
Hope this helps.
M A Smith, does the operator have a permit to drill a well on the lease? If so, then the key language is “Lessee is then engaged in actual drilling operations”. I had a similar situation with a permit before the end of primary term and driller showing up a short while after the primary term. That’s my situation but yours might be different.
I believe Wade covered it!
Thanks to all of you for your comments.
per Stephen’s comment, a permit does not extend a lease. Unless they have a rig out on the property and are engaged in physical drilling activities the lease will expire after midnight on the final date of the primary term.
Thanks Buzz. “Actual drilling operations” likely means a rig has to be present and a bit in the ground. I don’t think site prep qualifies. If anyone hears any word on how the Jett Rink well north of Toyah does, I would appreciate word. Lease rates in Reeves remaining strong despite the price pull back.
RigData w/e 9/19 report shows 56 active rigs drilling in Reeves County:
Most
Active
BHP
5
COG
5
Oxy
5
Rosetta
5
Cimarex
4
Energen
4
J.Cleo
3
Patriot
3
Atlantic
2
Brigham
2
C-Williams
2
Conoco
2
Elevation
2
Endeavor
2
46
Later – Buzz
Hi Y’all,
In your OGL contract, the paragraph on Continuing Operations must be read very closely. It can mean the holding of your lease indefinitely simply by the “stakeing of a well site”.
On one occasion we could not get them to clarify Continuing Operations to the point, we had to add a clause to the contract ourselves which said; “Continuing Operations shall be constituted by a drilling rig set up where a well has been staked with the drill bit in the ground turning to the right.” At that point, they conceeded. Since then, it is added to every Lease contract we execute.