Stripper Well

General Mineral Rights Discussion
1

I have a well in McKenzie County, ND for which Whiting Oil has filed an application with the NDIC on April 3, 2017 for a Stripper Well Property Determination.

In their letter to the NDIC they say "Information contained in the application indicates that the well is a Property pursuant to statute and rule, and Whiting has elected to designate said well as a separate property for stripper well purposes. The well produced from a well depth greater than 10,000 feet. During the qualifying period, April 1, 2015 through March 31, 2016, the well produced at a maximum efficient rate or was not capable of exceeding the production threshold. The average daily production from the well was 27.9 barrels of oil per day during this period."

What does all this mean, if anything, as far as future royalty payments? I have looked through our lease but could not find anything regarding a Stripper well.

It should be noted they have drilled and fracked other wells nearby and daily production has averaged 75 barrels per day from November 2016 to the present.

2

Terry, that well may produce for the next 30 years as a stripper well. Nothing should change with your royalty unless the checks are so small Whiting holds payment until it reaches a threshold before paying.

What Whiting is after is there is a tax incentive for continuing to produce a stripper well, they are taxed at a lower rate.

3

Thanks for the response Mr. Kennedy. I kind of figured it would not affect the royalties but was a little concerned.

4

If the stripper well designation in ND means what I think it does in Texas, they might be paying a lower severance tax, which they are probably deducting from your royalty check. Chesapeake got nailed for that in Oklahoma several years back. You might want to check what tax rate they are withholding. It does have other benefits to the company that won't affect you