Had initial meeting with oil company. Here are some facts and the discussion we had:
1. SWD in operation for 20 years
2. Pumps 5200 barrels/day
3. Capacity is 15000 bbl/day
4. Oil company says high volumn wells will NOT get paid by the barrel, only flat rate
5. Most if not all water is coming from off property
6. Oil company says it cost them $55 to make a barrel of oil
7. Initial offer was $20k/year! old Contract is 10K/year signed 20 years ago.
8. Said he would ask for $50k-$60k/ year if we agreed
9. We are in Tom Green County, Tx
10. They cannot truck it.
11. Old contract runs out in 9 months.
My questions, how valid is his statement that high volumn wells are not paid by barrel, if valid, what threshold is a high volumn 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 then .o5/barrel
$1500 land lease per month
3% skim
Escalaltion clause based on COPAS Overhead Adjustment Factor
STRONG Indemnity Clause
No advice or suggestions?