We have 5 NMA in Sec 17, Township 1South, Range 4West with a lease on this location at 3/16 royalties that runs out in Feb 2020. No production or drilling at this location to date that we know of. Recently received offers to buy at 3/16 from Echo Energy at $7500/NMA and $10,000/NMA at 3/16 from Palmetto. Assume both of these are legitimate companies. We are in our early 70’s and no heirs to pass on any of our interests and have started to think about selling to secure monies now. Any suggestions or advice on exactly who or how to proceed if we do decide to sell? We also have active and inactive mineral interests in several other counties in Oklahoma. Thank you.
The reason you are getting offers is that Continental is planning a horizontal well in section 17&20. The offers are coming from companies that want a piece of the action. Most first offers are low in my experience.
Have you received the Oklahoma Corporation notices for the cases regarding the pending well?
Yes, we frequently receive Oklahoma Corp.notices for cases regarding a pending well and updates from attorneys representing Continental and Cheyenne Petro.
Looking long term holding on to our mineral rights often results in more pay out eventually. I see the question for us as being how much royalty our 3/16 would pay out going forward based on production, production length, oil and gas prices, even political circumstances. At our mid-70’s with no heirs for our interests maybe a good offer to sell may provide secure and a finite amount now. We are looking for some advice simply to get direction on things to calculate, investigate, research on the best and possibly the safest way to move on a sale should we decide to go that route. Any publications or web sites or material can you suggest or any thoughts on how to proceed? We have followed the forum for several years and your range of knowledge has been helpful. We greatly appreciate any help or advice offered.
Skeet 17-20 LW1H was drilled in late 2018. It had first sales very near to 6/15/19. You should be getting the Division Order by November of December 2019 and then payment probably in late December of January. The first check will be the largest as it will be for about five-six months of production. The next one will be for just a month of production. Generally, the production on a horizontal well has the shape of a “hockey stick” on its side. The first few years are the blade and then the wells can last decades at a low rate which is the long handle.
You may have additional wells in the section when the timing is right and if the geology is good. The current thinking is that those child wells need to be drilled fairly quickly in order to have better performance. You have to factor possible multiple wells into the financial value. Companies want your current royalties and your future royalties. They usually buy on your current royalties and then they expect to make a profit on the future ones. I usually look at nearby similar wells to see if there any that would help me predict what mine might do. Those first buy offers are generally low in my opinion. They just want to see if someone will bite.
In your case, you have to choose whether to take this first year or three of royalties and then sell, or sell now. I cannot tell you which way to go. Suggest that you talk to your accountant or estate planner if you have one.
I have had multiple offers to buy in this area. Some have been vague with no amount at all. Some have had that “up to” phrase in them which annoys me. I would rather have them state the amount offered at each royalty level. 1/8th royalty will get a lower offer than a 1/4th offer.
If you decide to sell, you can will need to be careful which company you pick. If you get a broker to help you, they will charge a fee. Ask what it is. You need to ask hard questions-see below.
If you post on the forum FOR SALE site, you may get multiple offers (or not). You can try to find various minerals buying groups.
When I get an offer and if I were interested, I would do several things to see if the buyer is legitimate.
-I look them up on Bizapedia and see how long they have been in business. No problem in being a new company, but I am looking for the owners to see if they have experience and their BBB rating.
-I look up the owners on LinkedIn or other sites to see what their training and background is.
-I look up their website. Are they willing to say who they are? Who is funding them? What do they do? etc. If they are not willing to reveal who they are and how they are funded, then I will not deal with them.
-I ask if they are willing to put 10 percent of the purchase price in an escrow account as a good faith measure. What third party is holding that escrow for them? Attorney? Accountant? I want a PSA (Purchase Sale Agreement) in writing and an agreement that the remainder of the payment will either be paid to the escrow account and my third party who is holding my lease will turn it over when the check clears or it will go to my direct direct deposit account before my third party will be handing over the lease or deed. NEVER hand over a signed deed without getting paid. If anyone wants that, walk away!
-I would try to get at least three offers that fit that criteria and then take the best.
You can keep the minerals and get the revenue for the first few years. You can sell the minerals. You can sell part and keep part. You can put the minerals in your will and give them to a charity, etc. You can enjoy the revenue during your life and then know that others will benefit in the long run.
Martha, this situation does not apply to me as I do not plan to sell. However, I just wanted to say what complete and clear advice you offered to these people. Articulate and well done!
Robert, the offers to buy from Continental are part of their ongoing program to buy up royalties in the areas they are operating in. I’ve been getting these offers for awhile and they have been going up over time. The last offer I countered with an amount I was pretty sure they would not accept but they did go up another $1,000/nma. Within days I received fat envelopes from their attorneys with applications for new wells. I was seriously considering selling but now I’m back to wait and see.
Martha: Many thanks for you quick and detailed response to my questions. We are following up with many of your suggestions and appreciate your help and knowledge. You’re the best! Robert Blair
Hello to Stephens County mineral owners. I haven’t posted in quite a while but definitely need some information/guidance now. I own mineral rights in sections 9, 10, 11, 15, and 27 in T1S R4W. I have been receiving notices of OCC hearings for proposed activities in each of these sections for some time now. Recently Section 27 seems to be very active with Cheyenne trying to get a permit to drill. There are two cause numbers involved, 201904863 and 201904857. These are both titled "Notice of Hearing Application for Emergency Order, and the hearings are scheduled for 9:00 am this morning (4 Oct.).
What exactly is an Emergency Order? Each of the applications contains this paragraph: “WHEREFORE, Cheyenne Petroleum Company prays that the Commission enter an Emergency Order granting authority to commence drilling operations, complete, test and produce only for testing purposes the initial horizontal well prior to a final determination in this cause.” The application is for a horizontal drilling and spacing unit. What exactly does this mean and how does it affect royalty owners?
Thanks in advance for any information you may provide.
TERESA- just means that Cheyenne really, really wants to be the operator of the unit. Absolutely no effect for the mineral owners.
Well, it can affect mineral owners if they are not a prudent operator and are contending with someone who may be more apt. Is it possible to know who might be protesting? I haven’t heard the greatest things about Cheyenne operationally.
Any leasing or other mineral offer activity in one south four west Stephens County Sections 24 and 32?
89 Energy has pending OCC cases in sec 24-1S-4W with leasing in the section by various companies. Section 32 pretty quiet. It is in a different fault block. In general, part of the township has pending horizontal drilling coming in due time.