Section 5 & 8 T3N R4W

Oklahoma Mineral Rights Garvin County, OK
1

The family inherited land and mineral rights for the subject property and recently received an offer for a multi-unit horizontal well from Marathon Oil. As many of you know (because we don't have the best clue), we have been presented options that include chipping in for the well - that's a no go, a lease/assign of interest to Marathon for a cash consideration of $1,350 per net mineral acre delivering an 81.25% net revenue interest (3/16 lease royalty) or the same but for $750 cash consideration and a 80% or 1/5 royalty lease.

First question, any word on the activity in this area and second question is can someone just throwdown a quick "you're a dummy" breakdown of the payouts? I've read that the net mineral acre is typically found on the title of the land but I don't have it handy I'm just trying to help my mom out with this stuff best I can.

The property was split amongst the "sisters" of the family, i.e. my grandma and my great aunts. Just an FYI - we are looking to get a local attorney or a "landman" to assist with this and I know that's generally the advice - but I thought I'd come here just for some real quick insight to understand the payout and perhaps some advice other than "get an attorney".

SO, question is, what is the royalty 3/16 or 1/5? The royalty on production? If we have multiple units/owners, is that applied across the board somehow and split amongst us or is that just our split. Is there a way to find out the net mineral acre other than having the title in my hand?


Sorry so green here, again just trying to understand this best I can for the family. Thanks for any help you can give ...doesn't have to be real in depth or anything - just looking for a quick breakdown of the jargon and a "ask for more dude!". You're awesome! THANKS!

Jake

2

Melrose--you are asking all the right questions. Anyone who tries to give you any assurances on "payout" is to be eyed with suspicion. Horizontal shale wells and reservoirs are generally considered to be difficult to engineer for the long haul.

Simple formula: if you own 5 net mineral acres, and you execute a lease for a 1/5 royalty, and the unit is 640 acres, your net revenue (share of the money attributed to the Section) is 1/5 x 5/640. Multi-unit wells often split the revenue from the well between sections. So if your Section is allocated 40% of the production, your net revenue from the total well production is 40% x 1/5 x 5/640. Do the math and you will see why the size of your interest is very important.

Generally, each owner makes their own deal and executes their own lease.

A lot of pros go for the best cash they can get with a 1/4 royalty. Hard to get $ & 1/4 in some areas.

Sometimes the landperson making the first offer can tell you how many net mineral acres they think you own, but don't take that number as gospel. If you own less than 5 net mineral acres in a Section, you should consider the ROI of hiring a lawyer or landman--may not be worth it.