My family was recently approached by a perspective buyer to purchase our mineral rights in Weld County. It seems there is still interest in the area. Here it is December and things still seem to be happening. What is your take on the current situation?
Bryan said:
Hello forum. I see a great deal of dismay as to leasing herein and many comments some good and some not so good. I have 30 years in the oil industry, primarily working as a petroleum geologist but moving into mostly management functions for many years. I co-own an oil and gas firm and also own minerals so I am familiar with all aspects of leasing from both sides of the coin.
It appears many of you have seen the Wyoming auction results and are basing prices on that. The Wyoming auction ranged from 30.00/acre to as high of around $3000.00. This difference is due solely to the tracts locations. Wyoming tracts that brought the big dollars are in what is called the Silo Oilfield - a huge Niobrara oil producing field from vertical wells so those tracts clearly were very valuable for horizontal drilling which is the key to all this. Other tracts that brought top dollar had wells which had been drilled in the past and reported or tested oil shows and fractures in the Niobrara. There were also tracts not having these Niobrara oil shows that brought very little. So you see it all depends on what has been found nearby recently as well in the past.
Anyone who has acreage within a few miles of EOG’s Jake well in Weld Co,. Colorado is going to recieve higher offers in the 1500.00+ range. Farther away and farther from the oil window of the Niobrara and you will get far less. I would not dealy leasing to long because this thing can die as quick as it came along in certain areas as dry holes and poor performing wells are drilled - and they will be. The good Niobrara wells have to have fractures and obviuosly the whole NE of Colorado does not have fractures in the Niobrara in the quantity as needed to make the excellent wells required to be profitable at 3.5-4.0 million per well without leasing costs.
Mineral onwer associations can be both good and bad and usually are worked to the advantage of a few in my experience. So I caution you on joining these as they really are not necessary if you do basic research but in some instances where many mineral owners share mineral interests in tracts they can be great. No larger mineral owner would probably be interested in joining. One other thing I am aware of is EOG apparently has shut in their Jake well after it produced 50,000.00 barrles in 3 months. Is it declining so fast they do not want that out publicly or trying to keep ultimate reserves quiet for another reason? I have no idea, maybe they just need a gas line. I can tell you that 50,000 BBLS has not near paid their well costs by far. So if you have fair offers I would get it while the getting is good in most cases. Be greedy and you may end uo being needy.
Good luck to all in your leasing and hopefully drilling will be good to you.