I was wondering if anybody knows the value of producing mineral acres in Dunn County, ND. We are currently receiving about $10,000 a month in royalties.
Theresa,
If you feel comfortable providing it, the section/township/range and number of acres you own would help greatly in coming up with a general “ballpark” value. Even just the name of your producing well(s) would help.
Theresa,
In some areas of Dunn County, the value of your minerals may be considerably more than the discounted current income stream. The existing wells may have proven up far greater reserves than the initial wells indicate. A buyer, of course, will not tell you of that potential. You need to find that out elsewhere. The quality of your lease terms really come into play as well. But I think you have learned that by now. You apparently have a very valuable asset. Watch over it carefully as it may mean hundreds of thousands of dollars to you.
Thresa, you need to know what is down there, it could be twice as valuable as you think it is. Do you have both Bakken and Three Forks wells? If you give the legal description Township, Range and section I could look at what wells you have and their production, what kind of wells surround you and their production and let you know. You are extremely unlikely to make a good bargain if you don't know what you have. If you only have Bakken wells, you could have an equal number of Three Forks wells to look forward to. Then again, if you are selling, you could be selling based only on Bakken wells and missing out completely on the value of other produceable formations.
The legals are:
3-145-94 & 34-146-94
Theresa, as I suspected, you have only Bakken wells and I believe that you have produceable Three Forks formation under you. You have one well that was shut down march/april and I did not see a reason in the wellfile, but there probably will be some report filed. Likely the well will be back up and running before the paperwork catches up as has been the case with my own wells in the past.
Marathon has recently drilled a Salt Water Disposal well in section 27, T-146 R-94. Three Forks formation wells can produce alot of water with the oil, or Marathon could be tired of paying to truck the water from the Bakken wells to someone elses old well and paying to pump it down.
Theresa, I don't think your acres are more than half developed. Some of your wells are old and were drilled in 2007-8 when the technology was not as good and it will take longer for the oil to come out.
I would say that your position is like having a massive interest bearing account, that pays you monthly but has a massive penalty for early withdrawl of the principle [selling], including the discount Mr. Hutchinson mentioned, they will probably pay you 70% of what they expect your income would be for the next 5 years, on which you will pay 15% capital gains tax on if you can't/don't use the money to do a swap and buy real estate somewhere else.
The implications are obvious, after overestimating the decline rate and greatly discounting the value per barrel of oil, probably leaves 55% of the value of 5 years production for the cash after taxes if you sell now, assuming market fluctuations cancel out. Nothing for any future wells. Your acres will probably be in production for the next 50 years, probably with much reduced production but still paying. Some of your wells are around a year old and still in their steep decline phase and their production could be massively discounted, bear that in mind.
Theresa, there is alot that goes into selling producing minerals. Nobody buys minerals with the intent to lose money and with discounts on production and decline they try to make buying as safe as possible, also more profitable. If you are going to sell, hire someone experienced to handle the matter for you, I think they will make you more than their fee. I personally would not sell for the reasons stated above but everyone has different needs. I hope this helps.
How in the heck did you come up with that tract having produceable Three Forks under it? Wow, what other produceable formations do you see there?
If your going to bring up taxes then you should explain that they are probably in a 28% tax bracket so paying capitol gains tax being a lot less could look pretty good locking in some profit especially with things getting worse in Europe, the USA certainly about out of being able to borrow more than we already own and printing money will some day have to come to an end and oil production in the USA at a steep rise while demand is depressed. If you think oil can not go to 1/2 of what is is selling for your wrong. Of coarse none of us buys anything with the intent to lose money whether it's a house, a car or minerals. Almost everything everyone does in life is for profit, no one works for free or invest their hard earned money without expecting to make a profit, it's pretty much a given and not all buyers are crooks trying to steal from you, we all buy and sell all of our lives.
What is obvious is oil prices will go up or down and if you can guess where it is headed then lets go to Vegas. Yeah they could drill a Madison again and this time it might not be a dry hole and maybe a Three Forks and we could speculate oil will go to $1000 a barrel but that is speculating and speculating will almost always get you in trouble. If your going to speculate as what they are giving up in revenue if they sell any then one should also do the same telling them what they stand to lose if things go bad worldwide.
So just how much will you say they will be making in that 50th year you think it will be producing? Or just 10 years away?
r w, there are always 2 sides to everything and it seems like we take opposite sides a lot. It doesn't mean I don't think the world of you so don't take it to heart. At least your doing it for the right reasons unlike someone else advertising here.
Joe, I don't mind you disagreeing with me. I said that I think there is produceable TF under there and I do. I believe that Theresa's acres are far enough North that the TF has not thinned out yet. Joe you might benefit from looking at a map of the TF or as I do, look at a few thousand more wells. You might also recall that I have acres not too far from these to the NE and I have great TF production. I was also recently looking at a well far south of Theresa's acres where the well was "dry" in the sense that it not economic to operate but the operator admitted in the wellfiles that they had porpoised out of the pay zone for more than half of the laterals length and that was about 25 miles south and east of Theresa's acres.
On the subject of Madison production, I wouldn't have expected to see it there. Maybe they should have asked me.
As for what other produceable formations I think may be present? How about Red River? I think it would be worth a look.
If you glanced at the wellfiles which I didn't do before stating that there could be Red River, or I would have said Red River and Duperow because the location is just 2 miles northeast of Killdeer Field that has produced over a million barrels of oil and 700MMcf of gas since 1977.
Joe, I hope you are pleased with the answers.
Joe, I class the earned money from employment differently from that of selling property, you see the money that went into buying the property may have been taxed so you have the marginal tax rate of 28% for the money to buy the property followed by another 15% for capital gains tax which would be a whopping 43% in taxes for the property to earn the money to buy and then pay tax on the sale. Sure aint no free lunch. I can play games with numbers also. If the property was inherited, someone payed for it. If the property was homesteaded, they may have paid far more than mere money for it. Have a great morning.
Red River and Duperow.
What? No comment?
Mineral Joe said:
How in the heck did you come up with that tract having produceable Three Forks under it? Wow, what other produceable formations do you see there?
Theresa is actually getting revenue from a Marathon Well with her name on it that tested the Three Forks at 400+ bopd and there is another Three forks producer by Marathon a mile and ha half to the wast. The Three forks is not only an oil generator, it is a trap when the upward migrating oil is trapped by the Bakken shale above it.
r w kennedy said:
Red River and Duperow.
What? No comment?
Mineral Joe said:How in the heck did you come up with that tract having produceable Three Forks under it? Wow, what other produceable formations do you see there?
Thanks for reminding me that the Bakken and Three Forks have been combined to the extent that Bakken is being used as the catch all for wells completed in the Three Forks also, The pool designation of one of my Three Forks wells has changed to Bakken.
Pugh clauses naming formations likely are not effective when the state declares multiple formations a common source of supply, in explanation, to tap one formation is to produce from all formations considered a common source of supply. For a pugh clause to be effective I think you would have to get the lessee to say in the lease that formation/zones are released even if the state declares them a commom source of supply. Good luck with that.
I have seen no definition of what constitutes a common source of supply. It's possible that one barrel per year (or less) migrating from one zone to another would constitute a common source of supply
On the other hand, if you could use something more precise, such as xxx number feet above and below the highest and lowest perforations of the wellbore, which is reported and subject to verification, I think they would have to drill and produce a depth if the operator /lessee wanted to keep it. If it was not drilled in the primary term of the lease they would need to lease it again. If you are unleased, I would talk to my lawyer with this idea.
Some smart mineral owners who bargained hard have worthless pugh/depth severance clauses because they contained the name of a formation that has since been named a common source of supply with other formations. You could still take the lessee/operator to court over the intent of the lease/contract to release the other zones but it's going to cost dearly and quite possibly more than you would ever gain if the court found in your favor because it's probably worth at least 3 times as much to the lessee as it is to you since you signed the lease. Ask yourself if another lease bonus would pay for the court case.
Umm Joe, it does have TF production and is within 2 miles of over 1 million barrels of Red River and Duperow production.
I just figured since you want to hold my feet to the fire over a post about a spacing that might not even have been a 2560 almost 2 months ago, you might like to comment on this?
You never commented on this so I wanted to remind you.
Mineral Joe said:
How in the heck did you come up with that tract having produceable Three Forks under it? Wow, what other produceable formations do you see there?
If your going to bring up taxes then you should explain that they are probably in a 28% tax bracket so paying capitol gains tax being a lot less could look pretty good locking in some profit especially with things getting worse in Europe, the USA certainly about out of being able to borrow more than we already own and printing money will some day have to come to an end and oil production in the USA at a steep rise while demand is depressed. If you think oil can not go to 1/2 of what is is selling for your wrong. Of coarse none of us buys anything with the intent to lose money whether it's a house, a car or minerals. Almost everything everyone does in life is for profit, no one works for free or invest their hard earned money without expecting to make a profit, it's pretty much a given and not all buyers are crooks trying to steal from you, we all buy and sell all of our lives.
What is obvious is oil prices will go up or down and if you can guess where it is headed then lets go to Vegas. Yeah they could drill a Madison again and this time it might not be a dry hole and maybe a Three Forks and we could speculate oil will go to $1000 a barrel but that is speculating and speculating will almost always get you in trouble. If your going to speculate as what they are giving up in revenue if they sell any then one should also do the same telling them what they stand to lose if things go bad worldwide.
So just how much will you say they will be making in that 50th year you think it will be producing? Or just 10 years away?
r w, there are always 2 sides to everything and it seems like we take opposite sides a lot. It doesn't mean I don't think the world of you so don't take it to heart. At least your doing it for the right reasons unlike someone else advertising here.