Howdy folks. Apache recently applied for and received a permit to drill a horizontal well on some of our family property section 27/block 71. We are told drilling will commence within another 2 or 3 weeks. These days what is the likelihood of a dry well or is an under performer more of a concern. In the days of all vertical drilling, dry wells were not uncommon. Don’t know much about the horizontal world.
Re. Stipulation of interest. We seem to be stalled in payment from a producing well because 3 people have not signed the stipulation of interest. The wheel has been producing for over a year. How long can this hold up continue? Is there a time or limit to how much is held back? I have spoken to EOG and they have passed the buck to the landman at the well, but we’ve gotten no response. Have been told to pay the taxes for the mineral interest though
Charles has it right, Elizabeth. If there is enough value and it goes on long enough there is always the option to sue the other interested parties as a way to make the title clean. I don’t recommend that option unless all other options have been exhausted.
My husband & I purchased 10. 5 Acres and 5.1 Acres in Reeves County TX. In 2005. Is anything happening in this area.
I did give permission for a Survey in 2013 Tract#N0018.01 on both properties to Universal Field Services, for Prism Midstream LLC.
In 2013 I received a letter stating a land owner would like us to listen to an offer to purchase our land. I did a reverse directory on his # and discovered he works for Prensorus Energy in Abilene Tx. I sent him an email asking him to explain this. No Reply.
Any advice would be greatly appreciated.
Plan%20Texas%2010.5%20Acres%202017.jpg
Information on the 10.5 Acres 10%2B%20Acres%20Texas%20July%202017.jpg
Is there any activity in this area. Previous post is also mine.5.1%20A%20Texas%20July%202017.jpg
I have a question. Calculating royalty. The math is somewhat confusing. Can someone clarify. I will provide the numbers. Say you own 5 acres in a section. They drill a horizontal well that crosses underneath your 5 acres. Your royalty is set at 20%. Oil production is 1000 barrels/day. Value of oil is 50.00/barrel. How do you calculate how much you will be getting every month? What is that number for me owning a meager 5 acres.?
Richard,
A section is 640 acres of which you have 5 (5/640) or 0.0078 of the section. So you have 0.0078 * .20 (20% royalty) = 0.00156 interest.
1000 bbl*$50 = $50,000. $50,000 * 0.00156 = $78 This does not account for taxes and other fees of course. Someone please check my math!
I receive offers to purchase our minerals regularly. Some come in as multiples of royalties while others are flat rates. Some are pretty obvious brokers looking to flip the minerals and others are end buyers. Does anyone know of a good resource that explains all the variations? Thanks
Richard the answer to that question will depend on how the well is permitted and if your lands are pooled into the unit. If you have the legal description then we can check so see if there is a well permitted on it and determine the interest. Your math is correct if the well only unitizes the 320 containing your 5.
Thanks Charles. So 3 times lease bonus is generally too low to sell? What is a good rule of thumb then? 4 times? 5 times? 6 times?! Anyone with experience know? Thanks!
Tom Parker -
Send us your legal description(s) and we’ll look your area up.
Is there a general rule of thumb ratio for leasing to sale prices? I heard 3 times leasing rate makes a good sale price. But that seems low to me? What do you all think?
Richard Saxton -
There is a fairly simple formula, but you need the size of your Unit to accurately calculate your potential income.
What is your legal description?
Richard -
I need to see if your lands are in a pooled Unit. Unitized with other lands. Many of the Units in West Texas are 1280’s, not just 640’s.
If your lands are included in a Unit, then you will receive royalties from every well located within the Unit, whether the pipe passes through your lands or not.
Legal description?
Legal description is block 13 section 247 of H&GN Survey. This section is a mess as the owner sold over last few years to many owners with small acreage. I have no idea if it will ever be developed. Is it pooled as a section (640) or more? Is it best to sell at this point or hold on, owning such a small parcel? I have a solid offer to buy at 13K/acre here. Possibly could go a little higher with some lobbying. Thoughts?
Tom, it’s not that easy. Multiples of lease bonus offers are not a good indication of the value of the minerals in the ground and are probably more indicative of the sophistication of the mineral owners and their skill at negotiating lease bonuses.
Where my minerals are, I have seen operators lease the acres for less than $1,000 an acre and turn around and mortgage them for $55,000 per Leased net mineral acre. I doubt the bank is loaning them more money than they expect the company will make off the acres. Considering the bank knows the company also has to pay someone a royalty? I could make a case that several someones think those acres have a value in excess of $100,000 at a minimum. Most buy offers I receive are $1,500 to $3,000 range. My brother just called one to thank them for the offer but we just received an offer four times that amount to Lease/ not sell and at 20% royalty. Which brings us to the first rule of O&G.
I tell family the “FIRST rule of O&G is to ALWAYS make a killing”. If you are not making a killing? There is something wrong with the deal! As we are the mineral owners, we are on the wrong end of that, as you are.
If you are a motivated seller? Take whatever you think is enough, for you and never look back. You could sell on an online auction site, with many companies and individuals Competing to see who can get it while paying you the least. You get the Best of the Worst as a friend of mine calls it, which may handily beat the offers that come in the mail. I wish you luck.
Also our lease is about to expire. It sounds like lease bonus rates have gone up substantially since we signed. If you have a lease with a 2 year option and the lessee operator ends up not interested in pursuing activity on your land, can they usually assign/sell the lease to another company, allowing the new company to get a 2 year lease at substantially below today’s rates? Thanks.
Tom Parker -
3 times the Lease Bonus Rate might be a rule of thumb in some parts of the world, but not in the Permian Basin. From what I’ve been hearing and seeing, depending upon where your lands are located you can get anywhere from $8K per net mineral acre to $32.5K per acre.
Yes, the company that owns your Lease can sell/assign it to anyone they want (unless it contains a clause or provision governing the issue). They can sell/assign it the first day they own it or the last.
I understand that calculation from the perspective of the section. But if the well does not cross your property, but is drilled in the section do you get royalty? In other words, is receiving royalty from a particular well only given those landowners included in the drilling company’s approved permit? So say a horizontal well is drilled on the west 320 acres of a section. Are the landowners of those 320 acres the only ones in the section to realize royalty? Or is it the whole section. ? If not the whole section then the math would be 5/320? right?
Richard,
I believe Steve Leker’s calculation with your assumptions is correct except the royalty is $78 per day; a monthly check would be about $2,300 per month.
Steve Johnson