Hello, I am new to this group and have a pressing question. How does one assess the Echo offer of 40K for mineral acre (3/16) royalty on section 20 -2N-4W. Whatley 2 is producing and I believe their are 9 other wells yet to come online.
Just got an offer from Eccho 16,000 per acre on Sec 5 2n 4w today
Karen,
That is one of the first steps to drilling a well. To establish the expected drainage/common source of supply.
Here is the OCCs info page on it.
Continental had their checks posted on their website yesterday. Hopefully Newfield will have theirs posted today. Our CR check on the Claudine was down again but only a little.
Karenā¦do you mind telling what the description of your minerals you received those paperās on (ie: section, township and range)?
Thanks M Barnes for the fast reply, I found it very useful.
I just received a document from the court clerkās office-OKC Corporation Commission of OK (is that the same as the OCC?) announcing a court hearing on a petition to establish a well drilling and spacing unit for a common source of supply underlying a certain area (actually in different county). This is the first time I have been through this part of the process. What is this step referred to in ownersā conversation, and what is the significance of it for me?
You basically have to calculate how much royalty you would make over the life of the wells (and any future ones) which is about 25 years versus the amount that they offered. Woodford wells have a fairly predictable decline curve based upon what is known. The unknowns are the price of products, how much of each product, mechanical difficulties, if you have deductions in your lease or not, etc.
For example, an example would be 20 acres in another county with 9 horizontal gas wells that have been producing for only two years. So one would only getting gas prices and very little for condensate. So far, the royalties over those two years have been approximately $23,000/ac, with many more years to come at much reduced rates of course. So $40,000/ac would not be enough for that area.
Letās just estimate that the Whatley 1 will make 2,627,000mcf and 38,100 BO over the life of the well. Use whatever prices you feel comfortable with- $70 oil and $3.00 gas gives $7,881,000 gas and $2,667,000 for oil for $10.5MM. If my math is right, then 3/16 royalty on that gives about $5500/ac. Now eight more wells? Some better some worse, but estimate about the same gives a very rough guess of $44,000 per acre. What about the 15 wells that I see planned or drilled for that section. Now you are looking at about $82,500 per acre. No promises, I am just doing the rough math in my head. What if the prices are higher in the coming years? What if they drill another reservoir above the Woodard?
In my experience, the early offers to buy are about half of the true value of the minerals. Looks about right here. So if it were me, I would not take the current offer. I would get a better than āback of the envelopeā estimation based on the performance of these new wells coming on line. I would also let the wells produce for about four years and then re-evaluate selling.
Now consider if you get these royalties spread out over 20-25 years and what that does for your tax bill and what kind of legacy you can leave to your heirs versus getting a huge amount now.
Or if you need cash now, donāt sell all of your acres. Just a thought. But I donāt think $40K is enough. Others folks can chip in.
20-2N-4W
I was looking on a Drilling Info map and counted 15 drilling lines, but let me see if I got them all. Adjust the math for my estimates. These wells had really good completions, so you might want to hang on and get those first few years of production. Also, as you can tell from the names of the wells, a portion of the production will be attributed to Section 17 where there are perforations there.
Poteet 2-17-20XH
Poteet 3-17-20XH
Poteet 4-17-20XH
Poteet 5-17-20XH
Poteet 6-17-20XH
Poteet 7-17-20XH
Poteet 8-17-20XH
Poteet 9-17-20XH
Poteet 10-17-20XH
Whatley 1-20H
Whatley 2-20H
Another one goes through 20, but not sure if it is perfing in 20, but probably a portion will be -McElroy #2H-19
at least 12, the map has a couple of double lines for 2, 10 and 9 , so they may not be quite right. Those were the other extra 3.
Hamptonā¦the Echo man that called me to explain their intentions said he reads this forum so Iād say if you are interested in selling he will probably contact you. Like M Barnes said you just need to weigh both sides of it and decide what you want to do for sure. Either way you will get to pay Uncle Sam his part. Itās a fact of life.
I recvd a phone call from Echo last week also. Nice fellow, but I think they are offering about 1/4 of the worth. But you never know what might happen. Fracking issues, Iran issue, and prices of oil and gas could make these worth a whole lot less. Iām not selling. My relatives hung on to these since the 20ās and now Iām the one who is benefiting. I feel I owe it to them to hang on and pass them down.
We received some of our royalty from my mother in law but we purchased most of it. We have not sold any of the royalty because we feel we can receive more from royalty that we have been offered for it as of the present. Leaving it to our kids has nothing to do with our decision as weād rather help our kids and grandkids while we are alive to see them enjoy it. If we make any decision that benefit us it will benefit our family so weāll hang on to it as long as we think we can make more money by holding on than we can to sell. When and if we are offered enough to benefit us and our family we will certainly sell. That offer hasnāt been offered to us as of yet. If we were offered $40,000. an acre we would consider it for sure.
Did anyone receive a direct deposit for the wells on Section 16 2n4w (that would be the Branch wells and the Jerrod). They didnāt post it yesterday and was wondering how it compared to last month. Really expecting it to be down quite a bit because of the month or two shut down of the Jerrod and waiting on snail mail drives me bonkers!!!
Lynn, what S-T-R are the Lowrance wells in. That helpsā¦
Kenneth, apparently they do know something if they are offering that kind of money.
Kenneth, with no significant production in or near your section I doubt you could get half that. If you get that kind of an offer someone knows something you donāt know. You will never be offered as much as itās worth, that wouldnāt be profitable for the buyer.
What is going on with the Lowrance wells? Any news or updates?
They are drilling 6 Vanarkle wells under 10 & 15 from 15-2n-4w
Does anyone know whatās happening in 15 1N6W? It was pooled in late December 2014. I have a lease with a 2 year option that expires in mid July, and have not yet seen any drilling permits or a check from Bearcat exercising the option. If they donāt renew, would $20K per acre be a reasonable asking price for my unleased mineral acreage in that Section? Am I a dreamer?
Yes Michael, good geology according to some but not āprovenā by actual production. Maybe the next generation will enjoy some returns. Still, $20K per acre is a FIRM offer!! Tell your neighbors, tell them your friends.