Had initial meeting with oil company. Here are some facts and the discussion we had:
- SWD in operation for 20 years
- Pumps 5,200 barrels/day
- Capacity is 15,000 bbl/day
- Oil company says high volume wells will NOT get paid by the barrel, only flat rate
- Most if not all water is coming from off property
- Oil company says it costs them $55 to make a barrel of oil
- Initial offer was $20k/year! Old contract is 10K/year signed 20 years ago.
- Said he would ask for $50k-$60k/year if we agreed
- We are in Tom Green County, TX
- They cannot truck it.
- Old contract runs out in 9 months.
My questions, how valid is his statement that high volume wells are not paid by barrel, if valid, what threshold is a high volume well?
What would be a good price if it were flat rate? .15/barrel would be around $275,000/yr.
I’m thinking counter offer of: 5-year contract No less than .05/barrel $1,500 land lease per month 3% skim Escalation clause based on COPAS Overhead Adjustment Factor STRONG indemnity clause