Hello, I think I have a novice level question here. I recently signed a contract to lease our mineral rights in Love County and have received the check for it. Two days later I received a Well Proposal from the same company. I should just ignore the Well Proposal correct? I am not sure why I received this Well Proposal with 3 options after just agreeing to a lease contract. Any info would be much appreciated. Thank you.
If you executed the oil and gas lease, you can for the most part ignore the well proposal letter. But I would put it in your well file just to keep records of who you leased to, etc.
I suppose the letter was for what’s called “Forced Pooling” if you don’t mind would you share the three options that were offered in the letter?
You can ignore the lease proposal. That came from the pooling list of potential respondents. The folks that handle that list probably didn’t know that you had signed the lease since it is a different group. Do put it in your files along with your lease copy and any other information you receive from the OCC.
Thanks for the feedback. I am filing all correspondence for records. Forced pooling is how I interpreted it. It looks like a letter sent to anyone who may have a claim to any mineral right in said location. Like it is a last shot to take an offer. A hearing is scheduled for Dec 9th. The options offered in the Well Proposal are: 1. Pay your proportionate share of actual well costs as set in AFE. 2. Lease with bonus of $750 per acre and 1/8th royalty. 3. Lease with bonus of $650 per acre and 3/16th royalty. Those numbers make me quite happy with the lease that I actually signed. Thanks again.
IF you leased, then you will not be able to participate in the pooling. Hopefully, you got better value by leasing.
I did. I am happy that I signed when I did.
I own in same and was never offered a lease. Can you tell me who so I can reach out to them ? Thanks
I was first contacted by Blue Baron Energy. Leased to Trailhead Exploration. There is a David Lane Murphy listed in the Well Proposal. FYI.
- the landman is with Blue Baron.
I got the same offer from them - same section plus some adjacent sections. I guess 3/16ths is about the best one could expect, right? Is the $$ value of $650 per “delivering an 81.25% NRI” fairly standard? Says it’s an exploratory well. I know there’s some caveats that are good to include…depth clause…must produce in a certain time, not just drill and hold forever.
I forget the industry terminology for all that. Any help would be appreciated. If i ask will they tell me to go fly a kite and enjoy the pooling?
First offers frequently only have the 3/16ths offer. I always ask what they are offering for the 1/5th and 1/4th. If I cannot get the terms I want for a lease, then I am perfectly happy to go to pooling. It has its own advantages.
The most important issue to negotiate is “no post production” charges. Those can eat up your royalties. Other important clauses are a depth clause, commencement of drilling clause, no warranty of title, limits on the shut in time frame, no top lease clause. no use of oil, gas or water without paying, etc. (not giving legal advice).
Never hand over a signed lease without getting paid. if you get further along in negotiations, can give you ideas on how to handle that.
Thank you for highlighting the main points of what i need to focus on.
They say they’re drilling down to over 17,000 feet vertical and 20,000 horizontal in this section. Drilling under Red River into Texas by the looks of it.
What’s interesting about that is i was asking a geologist about my other property where the shale intersects me around 17,000 feet. He said that deep is “probably beyond the economic if not technical limits of effective horizontal drilling & fracking. It will be pure methane at corresponding temps so the economics will be even more daunting”.
So either the technology has improved or the geologist is wrong. What do you think?
Technology has improved and the geologist may be right. However, I don’t work that area and cannot really comment without knowing the background.
I looked a little further. The well is only going to be in sections 8, 17 (partial section) and covers 29 acres of section 20 (tiny section due to the river). Perhaps located no closer than 330’ from the west border of the three sections.
As far as products, XTO has a well in section 6-8S-2E with oil and gas in the Woodford at 16,572’ MD. The next closest well to section 8-8S-3E is in section 3-8S-2E with oil in the Woodford at 18,232’. That one has been online since 2014. Nice well. So unless the structure goes deeper, oil is a good possibility. When the exhibits are posted for the cases, they may have the structure maps and it will become more clear. The toe perf of the Rudman 1-3H was 22,292’ MD (17,206’ TVD) and the Heel perf was 18,232’ MC (17, 453’ TVD).
Play is moving east into 8S-3E. I don’t think the well will be 20,000’ in the horizontal direction. That may be the total length of the well including the vertical portion. Not enough room for that much horizontal length here and would be stretching current technology. (There is a very long horizontal well in the Permian basin but under different conditions). Only about 10,000+/- of room for the horizontal portion of the well given the size of the sections and the wording of the spacing documents. Going into Texas would be a complication between the oil & gas rules of the two states.