Spartan Energy

Anyone know about what is happening with Spartan Energy? Received a letter from them inquiring about purchasing mineral rights. What are they worth for these coordinates?

This is for Colorado in Weld County. Would it be better to sell or lease these rights for this acreage?

See map for activity in the area, here is the link if you want to poke around yourself: COGCC Maps

Nickel Road Operating (Nickel Road Operating LLC) drilled a single two-mile horizontal in 4Q20 so you should already be getting paid. First order of business is reach out to them. Lease or divest? :man_shrugging: Short answer, depends. It may be awhile before they drill the rest of the unit, but it may not. The price per acre for a lease bonus would be much lower for a highly speculative buyer like Spartan. You could always neither lease nor divest and participate in the drilling of the wells. Here’s some math to consider:

1 acre / 1280 unit = .00078125

23 wells * 7MM = 168 MM * .00078125 = 131,250 > your share to participate

The producer has done 100M bbls in the first two years of production * average/bbl of 75 = 7,500,000

.00078125 * 7,500,000 = 5,859 * 23 = 134,765.625

The wells payout in two years purely on an oil basis and that’s with well costs well on the high side tbh. The producer has also done 250M mcf of gas. A reasonable estimated ultimate recovery (EUR) in this area is 200-250M.

You get paid on another 100M bbls over the next couple decades * average estimated price of 50/bbl = 500,000 * .00078125 * 23 = 89,843.75

Remember, this is for 1 NMA in the unit. Is it worth 100K/acre? No, it needs to be discounted for PV. If you lease at 20%, you get .00078125 * .2 = .00015625 but you’re not on the hook for costs.

.00015625 * 100,000 * 75 * 23 = 26,953.125 in the first two years. Add in gas revenue and discount, you come up with something in the high teens/acre. Lots of variables though. Hope this wasn’t more info than you wanted.

Unfortunately you wont see high teens in here when it comes to purchasing, that i can promise.

Can you share what they are offering to lease/purchase for? Royalty offered?

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