Good morning,
Can anyone give me some estimations:
I own 8.8867 acres in above section.
How many wells could be drilled on that amount of land?
If there is drilling and they have a "good well" what could be the possible month income from one well with 1/5 royalty? How long could oil or gas be extracted from that well?
I've been offered $12,500 per acre for my mineral rights and my lease expires in Jan. 2018. I have 1/5 royalty on that lease.
Thank you,
Susan Titus
Susan - there will be many different estimations of the number of wells that will ultimately fit within a section due to differing estimates of how close wells can be to one another within the same "zone" and differing estimates of how many zones under that section will ultimately be productive. I've seen estimates ranging from 12 to 28 wells per section in your area in recent operator presentations. The other big unknown is how long it will take for all of those wells to be drilled. You might get one well in the next six months and then no more for several years. You might also get four this year and six the next. It's all a big guess.
Thanks, Marcus.
Sue,
For the type of horizontal drilling that is happening now it takes a minimum of 640 acres to drill a well. What happens is the oil company takes your mineral acres and other mineral owners that are in your same tract of land and adjacent tracts of land until they get a minimum of 640 acres leased up and form a "unit". You will probably find it talked about in your lease, basically the state of Texas says one well will drain the oil from under 640 acres and that is why the companies have to have at least 640 acres from mineral owners under lease to drill. Like it was mentioned already, there are multiple zones at different depths that they can drill into on the same 640 acres but the oil companies really have no incentive to immediately drill another well in a different zone once they drill the first one on your land and "HBP" the land so it is held by production. They will first want to drill up the rest of their leases so they don't expire. It could be a year or two until they drill a second well or it could be 10 years until they drill a second, hard to say. In my opinion, you are looking at multiple decades of development and drilling before they have 12 wells per section. I will say though, your acreage is in a very good part of Reeves County, the same area that Diamondback just acquired the acreage from Luxe.
Your 8.8867 acres divided by 640 acres in the unit multiplied by 20% Royalty= .00277709 That means you are going to receive .277709% of the revenue the well produces each month. Now someone else can do the calculations as far as how many barrels per month a typical well makes but that will give you an idea of what your Net Revenue Interest is in the unit.
Best of luck,
Cam
Susan, just a quick thought. If they drill and hit a well, you can always sell the property then. If they don't drill and your lease expires in a year, the chances are you can release for a bonus of $4-6k/NMA, and you can see if they drill a well. Unless you need the money now, i wouldn't sell, even at that price.
Thanks, James
Susan,
Thanks for the info on the lease, I am in ward county and have a $5000. nma offer but I think it is low also they offered 1/4 royalty but I want more. I have an active lease to 5100 feet but open to lease below that level.
I think you maybe able to increase the per nma based on some info I have looked up. Double Eagle has paid $28261 pre acre for 23000 acres in the Delaware field or $650 million, I think this is in Reeves County. Exxon paid $24000 per nma for the Bass Family holdings in New Mexico, 275,000 acres at 6.6 Billion Dollars. I'm not sure if these are minerals only or includes surface. Don't take this to the bank.
What are the current offers per net Mineral acre for lease that you know of in Ward County.
Mike, just to clarify and offer some advice, I believe it was Parsley that bought the package you're thinking of for $650 million, and not Double Eagle, and of that, they got 5,200 net acres in the Delaware for $205 million. The deal prices that have been making headlines, including those you quoted, include properties that are already producing significant amounts of hydrocarbons. For instance, the Delaware properties Parsley acquired are already producing 1,100 boe/day. The tens, and often hundreds, of millions of dollars that have already been paid by the operators to drill wells, put in infrastructure, etc is taken into consideration when those sale prices are agreed upon.
As to your Ward County property, absent owning 100% of the minerals in a huge ranch in the heart of the play, it will likely be impossible to get a royalty greater than 25%. If you're already at a quarter, I would place the negotiation emphasis elsewhere, such as the bonus, cost free royalty, retained acreage clause, etc...
Best of luck!
Mike,
As Wolfcamp said those company to company transactions you stated are not valued the same way an individual mineral owner per acre bonus is. Those transactions are large acreage positions with considerable wells drilled and tens of thousands of barrels of production already. That means the selling company has already drilled lots of wells and proved the acreage and that is why you see the very high per acre prices. Your mineral rights are in a good area so you might be able to negotiate higher on your lease bonus but a 1/4 royalty is the highest a Lessee will go, I have never seen a lease taken for anything higher than a quarter during my career. I would also get a no deductions clause in your lease along with other standard clauses like a horizontal pugh etc. Do some research on here about what clauses you should include.
Best of luck with your lease negotiations!
Cam
Thanks, Mike.
I don't know anything about lease rates in Ward County but I'm sure others on this web-site can help you.
Good luck.
Thanks, Cam
Thank you Cam, Susan, Wolfcamp for the information. Very helpful.
Mike
I’ve gotten several offers on leases in Ward around $5000/nma. 25%, 3 year paid up. No cost provisions like in the GLO contract. Acreages are relatively small 20-40 acres.
Thank You James, appreciated.
Mike
I just wanted to pass on to you that the Texas Railroad Commission normally does start with a GAS unit's minimum size being 640 acres, but not necessarily an OIL unit's size, which can be as small as 40 acres or even less. As you probably know, many wells produce saleable quantities of both oil & gas, but they are determined to be oil wells or gas wells based on their gas to oil ratio (GOR). Unit size, especially with regard to vertical wells, also tends to vary with depth to the producing formation, with shallower wells requiring fewer acres and deeper ones more. Size of units also depends on whether we are talking vertical or horizontal wells. Further, well spacing requirements are also often reduced as development of a field/trend area progresses.
Not long ago I leased my interest in four contiguous sections in Loving Co. to EOG Resources. The lease provided for the maximum size of oil units to be 320 acres.
They have established eight appx. 320 acre drilling units (each 2 miles long and 1/4 mile wide) and 10 horizontal wells are currently permitted for the Wolfcamp Formation. The wells are classified as oil wells. The laterals (horizontally drilled lengths) are permitted to be approximately 2 miles long in each well. There are no producing wells on the acreage.
They just commenced drilling this lease within the last two weeks or so. Two rigs are running and are drilling two wells simultaneously on the acreage at this time. The interest in drilling so rapidly is not related to lease expriations coming up, as they have plenty of time left. How rapidly other locations will be drilled is yet to be determined, but they have told us that they plan to drill at least 10 Wolfcamp wells (including the two currently underway) on us "short term" (whatever that means). They have indicated to us that they can eventually drill up to 6 horizontal Wolfcamp wells per unit. There will also almost certainly be wells drilled into the shallower Bone Spring Formation at some point, as well, totally independent of the Wolfcamp wells.
Hope you find this of interest. While the specifics of this example may vary from your kwn, it can give you a good idea as to the kind of development that is going on in Reeves Co., as well.