Received notice from Silverback of intent to drill new wells in T18S, R25E, Section 34 Eddy County. I inherited a working interest and know next to nothing about the business. And I’m getting too old and tired to deal with the expense. Why not give a term assignment to Silverback for 3 years? Or is there a better choice for me? '(They may pool uncommitted interest owners into a spacing unit, whatever that is.) Existing wells have been producing for 30 years and I’ve never seen a lease.
It would be very wise to speak to both an oil and gas attorney first and perhaps an estate attorney before choosing what to do. That assignment could end up lasting way more than three years and you losing out on the royalties.
The OP here. I should have mentioned that the older wells barely break even on a cash flow basis. This WI has become a nuisance that I regret leaving in my estate. The $ isn’t worth engaging professional help and I’m not interested in more royalties if it means extending the life of the WI. I’m open though to any and all suggestions. Thank you for your reply here and to the many on this forum that you help.
You may be able to get the operator to buy your working interest out and leave you with a royalty instead. Never hurts to ask.
The other thing to consider is that your old wells might be conventional vertical wells with old low production. The new ones might be gangbuster horizontal wells, so you need to find out what the new wells are going to be as you might be really pleased with the outcome. Get more information before making a decision.
I’ve dealt with Silverback nearby. imo They would prefer that you assign to them rather than participate, therefore make the proposal to switch it out. They own quite a bit of the property around you and according to @NMoilboy generally overpaid for their properties, so in a sense they are commited with sunk costs. They have been offering bonus of $700/nma while 3 townships over they are getting $5,000-$6500/nma (forget who on this site reported that).
They will be drilling new Yeso wells in the E/2 of Sec 34. It will be something totally different from what you have been dealing with on the old vertical well.
You are an unleased mineral owner that has a WI in Sec 34 or you are a lessee in Sec 34? Basically…what is the royalty burden on your WI?
I’m assuming if you are talking term assignment you are a lessee. IMO, the move is to get a term assignment AND retain an override (if the current royalty is low enough for that to make sense). That way there is no expense, and you just ride the royalty train. As @M_Barnes suggested
I’d guess that participating in the wells would be a good idea also, but that is going to require a big $ up front which may be unappealing.