What are good terms currently for leases in Golden Valley?

We have mineral rights in Township 141 North, Range 105 West, Section 4 & 5. What bonus and royalty have people been getting recently? I assume everyone leases with Empire..Right?

Tim, Most, if not all, of this area was originally leased back in 2008 and 2009. Back then (prior to drilling) Empire was offering about $25 to $75 per net acre with 15% or 1/6th royalty. Last year they were offering $150 with 15% for an extension on a 2008 lease. So other than "extensions" I doubt there has been much recent leasing. Since then Whiting has drilled and reported about a half dozen wells around you. They've found oil yet none are big producers, and a few have been failures;

142-105 sec 32 produced 13,800 in first three months.

141-105 sec 2 produced 20,800 in first seven months.

ditto, sec 3 produced 23,400 in first eight months.

ditto, sec 9 produced 20,300 in first sixteen months.

ditto, sec 14 produced 4,600 in first twelve months.

So this is a very round about way to answer your questions. Empire (Whiting) is not apt to offer big bonuses in light of wells like the one in Section 14. However, the wells north of you in 142-105, and east of you in Sec 3, have been fair producers. As a result they should be very interested in getting you leased up.

First, in order to determine the "fair market value" seek competing offers beyond Empire's. If I were you I'd ask for a royalty of 1/5th (20%), and insist on no less than 3/16th (18.75%). On the bonus I'd ask for $450, and insist on no less than $350. Though I'd accept less bonus in exchange for the higher royalty. The size of your interest (10 net acres or 360 net acres) will also determine how much, or little, bargaining power you have. Though ultimately these are just my best guesses. If you can get two or three offers beyond Empire's you will know where the actual market is at. One final thing, since your minerals are in separate sections (4 and 5), be sure your lease includes a good Pugh Clause.

Good Luck and please post what offers you receive as many others will be seeing their leases expire later in 2013 and 2014.

Thanks for the reply. I'm new at this so I'll probably ask some dumb questions. How do I get competing bids and what is a Pugh clause?



Eastern MT said:

Tim, Most, if not all, of this area was originally leased back in 2008 and 2009. Back then (prior to drilling) Empire was offering about $25 to $75 per net acre with 15% or 1/6th royalty. Last year they were offering $150 with 15% for an extension on a 2008 lease. So other than "extensions" I doubt there has been much recent leasing. Since then Whiting has drilled and reported about a half dozen wells around you. They've found oil yet none are big producers, and a few have been failures;

142-105 sec 32 produced 13,800 in first three months.

141-105 sec 2 produced 20,800 in first seven months.

ditto, sec 3 produced 23,400 in first eight months.

ditto, sec 9 produced 20,300 in first sixteen months.

ditto, sec 14 produced 4,600 in first twelve months.

So this is a very round about way to answer your questions. Empire (Whiting) is not apt to offer big bonuses in light of wells like the one in Section 14. However, the wells north of you in 142-105, and east of you in Sec 3, have been fair producers. As a result they should be very interested in getting you leased up.

First, in order to determine the "fair market value" seek competing offers beyond Empire's. If I were you I'd ask for a royalty of 1/5th (20%), and insist on no less than 3/16th (18.75%). On the bonus I'd ask for $450, and insist on no less than $350. Though I'd accept less bonus in exchange for the higher royalty. The size of your interest (10 net acres or 360 net acres) will also determine how much, or little, bargaining power you have. Though ultimately these are just my best guesses. If you can get two or three offers beyond Empire's you will know where the actual market is at. One final thing, since your minerals are in separate sections (4 and 5), be sure your lease includes a good Pugh Clause.

Good Luck and please post what offers you receive as many others will be seeing their leases expire later in 2013 and 2014.

Close to your area they are three recent veritcal wells that are producing Mauss, Reichoff, Katherine. We have heard of leases going any where from $600.00 to $1500.00 with a 18- 22.5% royalty for a three year lease.
DO NOT ACCEPT a five years lease, they are a thing of the past. They will do a three if you insist, we have been doing three years leases for a long time so I know they will give a three year if you are prudent. Remember that your money is in the royalty not the bonus and the best lease is usually the last lease so be patient it will pay off well. Also contact other oil companies that just Empire (Whiting) to compete for your lease. The best lease is the only that mutliple companies were bidding on as close to drill date as possible. Here is the website for the State of North Dakota Minerals. https://www.dmr.nd.gov/oilgas/
You will want to click on the map from the left side menu and zoom into the GV area. It will also give you wells that are confidential. Also the GV courthouse has a link that you can get lease information from if you pay the $20 fee per month. Just to give you a little idea of market value outside GV try this article

Big Dollars For ND Leases

Diamond Resources of Williston dominated the high bidding for oil and gas leases ofered by North Dakota, paying a record high bonus of $13,600 an acre for McKenzie County leases.

Even so, Wildcat Oil and Gas paid a record high $21,000 an acre for two lots in Stanley in Sec. 21, T156N-R91W.

The Feb. 7 sale by the ND Dept. of Trust Lands in Bismarck brought in a record $85.2 million, with bids averaging $1,219/acre for leases on 69,942 acres in 14 counties.

Diamond’s high bid covered six tracts totaling 174 acres in sections 6 and 7, T152N-R93W.

McKenzie County led all counties, with bonuses totaling $31.9 million and

bids averaging $7,860/acre.

Diamond posted the second highest bid in that county, paying $11,700/acre for three tracts totaling 216 acres along the Missouri River in Sec. 10, T153N­R94W. Diamond paid a high bonus of $11,600/acre for four tracts totaling 640 acres, also along the Missouri River, in Sec. 3, T153N-R94W.

Empire Oil paid $11,600/acre for a 20-acre tract in Sec. 5, T149N-R95W.

In Williams County, where bonuses totaled $22,075,487 with an average bonus of $3,282/acre for 6,724 acres, Dia­mond was also high bidder.

Diamond paid $11,400/acre for 40 acres in Sec. 35, T153N-R99W. Agri Properties LLP also paid $11,400/acre for three tracts totaling 80 acres in Sec. 2, T155N-R101W.

Diamond came in with the second highest bid of $11,100/ acre for three tracts totaling 122 acres in sections 33 and 34, T153N-R99W. Hess Corp. paid $10,200/acre for 20 acres in Sec. 13, T153N-R99W.

In Divide County, bids averaged $1,760/acre with bonuses totaling $13,601,213 for leases on 7,725 acres. Again, Dia­mond was the high bidder, paying $5,000/acre for 88 acres in Sec. 25, T160N-R97W. Diamond was the successful bidder at $4,900/acre for 80 acres in Sec. 23, T160N-R97W, and paid $4,700/acre for 80 acres in Sec. 22, T160N-R97W.

In Mountrail County, bids averaged $1,709/acre, bringing in a total of $8.7 million for leases on 5,093 acres. Following Wildcat, Davis Exploration LLC paid a high bid of $10,000/acre for 140 acres in Sec. 36, T151N-R92W.

LSM Energy was high bidder at $8,800/acre for 80 acres in Sec. 11, T151N-R91W, while Herco paid $8,500/acre for 160 acres in Sec. 31, T151N-R91W.

These oil companies that broker (landman) your lease like Empire make alot of many money getting you to sign a low bonus/ royalty and even more for a 5 years lease. If you go to Whiting annual report it will tell you that the Big Island Project in GV is paying out $4000.00 (average) per mineral acre. So if you lease for $1000.00 where does the other $3000.00 go to the landman and Empire. Get a good attorney and do not settle for less. At the end of the day it's your oil they need, and once its gone it's gone forever. Also once your leased and they drill you are forever locked into the bonus and royalty until the oil is gone.


Tim if you're new to this spend the next week or so reading up on the leasing process. You can begin with the tab at the top of this page that shows "Mineral Help". FYI, a properly written "Pugh Clause" contained in your lease would prevents all of your minerals from being held by a single well on one small part of it. There are numerous other good sources to gain a general understanding of the important parts of a good lease. Look at the link at the ND web site (MaryAnne provided the link), also the Bakkenblog.com has some more pieces regarding what you want (and need) in a lease. While there are dozens of prepared leases out there, remember every lease deal is a negotiated process. You do not need (or want) to accept the lease terms you are first offered. Beyond the "bonus" & "royalty" the most important terms to you is the terms of the language used within the lease.

What MaryAnne posted contains some good points. Ask for a three year lease, I suspect they'll give you one without much fight. I don't know anyone who received $600 to $1,500 per acre, or 22% royalty, near you but $600 and 18.75% would not be a shock. However, the other prices quoted in the article have no bearing on what is going on in Golden Valley County. Nobody is paying $2,000, not to mention $13,000 per acre there. Also Whiting reports they have paid under $600 per acre on average for all their leases across the Williston basin, so I doubt they paid $4000 per acre for anything in Golden Valley.

The wells she mentioned are not too far away but they are not adjacent to you. Those three are to the east of you in Township 141-104. Whiting has had much better results on these wells compared to 141-105;

Sec 22: Rieckhoff 44-22 produced 68,600 bbls in under eight months.

Sec 22: Maus 23-22 produced 72,900 bbls in twenty months.

Sec 23: Katherine 33-23 produced 32,500 bbls in first three months.

Tim for the moment don't worry about bonus amounts and such. Just start by taking some time to become familiar and comfortable with the general terms of a lease. Once the lease is signed it is a binding contract you will have to live with. Also MaryAnne's advice is very sound to seek a good oil & gas attorney to help with leasing. Their job is to watch out for the potential pitfalls. So depending on the size of your mineral interest the attorney cost may be money well spent. Again good luck.

Hi Tim, I usually don't post on these forums, but I am also in the same general area as you. We are in Sections 19 & 30. My mother, before she passed away in 2009, signed a lease through Empire Oil for Petro-Hunt back in 2008. She did not consult an attorney and the lease she signed was less than "good". I can't remember the exact amount per acre, but it was somewhere around $50 and she agreed to a 15% royalty.

I don't know a lot about leases and royalties, this is why we did retain an attorney to negotiate the few mineral acres we have in Golden Valley and Wibaux.

I noticed that Eastern MT stated that they were offering terms for an extension on the 2008 leases, but we have not been contacted by anyone to date.

My advice to you is that you might want to have an attorney assist you on this. It could make a difference in the terms if you do not understand how they work. Some people are very educated in the terms and contracts so they can navigate this much better than I can, but that is up to you.

I'm in a very similar situation. I've been reading many of the references that were posted and have decided to do exactly what you said. I made the call to a gas/oil lawyer about an hour ago. Thanks for the reply!

So to add to this thread, My family currently have a lease set to expire at the end of July. T141 R105 Sec10 E 1/2 (50 net acres)
This lease was originally set up via Petro-Hunt for Whiting in 2008. The original lease was for $10 per acre,per year for 5 years with a 15% royaly. So today we get a call from Petro offering a renewal for the same terms. Of corse we said NO because of all the drilling in the area , including the horizontal from sec 15 to the south (Schaal 22-15h) that is going right into our east sec. After telling him this he said “realistically you can probably negotiate 4-5 time more than that but don’t count on 10 times more”.
So, what are my options as far as lease terms in this area? What is the going rate around me? Living in AZ I’m a bit out of the loop here. I’ve looked at the numbers on this thread but haven’t come to a real conclusion. Thoughts, suggestions, attorney?

Since you caught him lowballing you, I think he told you the truth. You might try 300 acre and 3 years 20%, probably higher in every way than what they are thinking but probably not out of negotiating range. You could just refuse to lease and let them come to you when they are ready to drill, unless you have a significant amount of acres and it's in your best interest to have them leased at all times for the bonus revenue alone.

The section above your 4 & 5 (which is about 1 mile) is going to be drilled next spring with possible 3 wells.
Under section 26 is a pool of oil in the red rock formation. The field is called Camel Hump.
They currently drilling on the north part of 26 with several wells in that area such as Maus , Riechoff, new Katherine and a very successful Bleis well that was just recently drilled this year. You would get a much better deal if you wait because the bonus rates and royalty rates (royalty is where your big is the bonus is just one time the royalty is for life so nothing under 20-25%) We have a family member close to you that got 20% two years ago or so.) continue to go up as time goes by. The best deal are the people that were last or close to last to lease. BUT YOU MUST HAVE AN ATTORNEY IN NORTH DAKOTA THAT DOES OIL AND GAS.
Mc Kennett Stenehjem Forsberg Law Firm Williston ND - David Hermanson is very good.
Mackoff Kellogg Law Firm Dickinson- Charles Peterson is also very good.
Remember your first offer is the lowest and they will go up alot if you are willing to hold off. You have what they want not the other way around. Learn about Plugh clauses and shut in gas every lease have different language about them that is very important. Also once you sign the lease and they drill and produce oil or gas your FOREVER locked into the lease terms. So if you lease for 20% today and five or ten years from the royalty market is at 35% or higher you will only get the 20% for life it does not increase ever. That is why the call it a locked in amount. The wells that were drilled ten years ago at 12-15 % . Now the same area is getting maybe 25-30% for NEW well only. So if you lease low you stay low so dont be in hurry to lease.

Just the large size of your acres should demand well over 20% and the $1000.00 dollar bonus. We know of people that have lease less then 100 acres three years ago at 20% and one over five years ago that had over 400 acres and he got 20.5% five years ago.
Great advice just wait until they NEED you leased that will get you your best price. You should get top dollar for your size of acreage. More than 20% for sure maybe closer to 25% if you want you most likely will get what you ask for. TIME IS MONEY

r w kennedy said:

Since you caught him lowballing you, I think he told you the truth. You might try 300 acre and 3 years 20%, probably higher in every way than what they are thinking but probably not out of negotiating range. You could just refuse to lease and let them come to you when they are ready to drill, unless you have a significant amount of acres and it's in your best interest to have them leased at all times for the bonus revenue alone.

Whiting is paying over $4000.00 per acre to Empire oil. So if you lease to Empire for $1000.00 per acre then they give the $1000.00 and they get $3000.00. ( they get more than you and it's your oil)
Empire's job is pay you as little as possible so they profit as much as possible. The best thing to do is contact other oil companies to see if they are interested in leasing your rights . This is done to create bidding war that is where you get the best price. Here is why some companies are paying in western North Dakota

Big Dollars For ND Leases

Diamond Resources of Williston dominated the high bidding for oil and gas leases ofered by North Dakota, paying a record high bonus of $13,600 an acre for McKenzie County leases.

Even so, Wildcat Oil and Gas paid a record high $21,000 an acre for two lots in Stanley in Sec. 21, T156N-R91W.

The Feb. 7 sale by the ND Dept. of Trust Lands in Bismarck brought in a record $85.2 million, with bids averaging $1,219/acre for leases on 69,942 acres in 14 counties.

Diamond’s high bid covered six tracts totaling 174 acres in sections 6 and 7, T152N-R93W.

McKenzie County led all counties, with bonuses totaling $31.9 million and

bids averaging $7,860/acre.

Diamond posted the second highest bid in that county, paying $11,700/acre for three tracts totaling 216 acres along the Missouri River in Sec. 10, T153N­R94W. Diamond paid a high bonus of $11,600/acre for four tracts totaling 640 acres, also along the Missouri River, in Sec. 3, T153N-R94W.

Empire Oil paid $11,600/acre for a 20-acre tract in Sec. 5, T149N-R95W.

In Williams County, where bonuses totaled $22,075,487 with an average bonus of $3,282/acre for 6,724 acres, Dia­mond was also high bidder.

Diamond paid $11,400/acre for 40 acres in Sec. 35, T153N-R99W. Agri Properties LLP also paid $11,400/acre for three tracts totaling 80 acres in Sec. 2, T155N-R101W.

Diamond came in with the second highest bid of $11,100/ acre for three tracts totaling 122 acres in sections 33 and 34, T153N-R99W. Hess Corp. paid $10,200/acre for 20 acres in Sec. 13, T153N-R99W.

In Divide County, bids averaged $1,760/acre with bonuses totaling $13,601,213 for leases on 7,725 acres. Again, Dia­mond was the high bidder, paying $5,000/acre for 88 acres in Sec. 25, T160N-R97W. Diamond was the successful bidder at $4,900/acre for 80 acres in Sec. 23, T160N-R97W, and paid $4,700/acre for 80 acres in Sec. 22, T160N-R97W.

In Mountrail County, bids averaged $1,709/acre, bringing in a total of $8.7 million for leases on 5,093 acres. Following Wildcat, Davis Exploration LLC paid a high bid of $10,000/acre for 140 acres in Sec. 36, T151N-R92W.

LSM Energy was high bidder at $8,800/acre for 80 acres in Sec. 11, T151N-R91W, while Herco paid $8,500/acre for 160 acres in Sec. 31, T151N-R91W.

Hello,

I just received an offer of $200 bonus per acre with 19% royalty on a 5 year lease in this area.

If it all pans out, I can provide details if interested.

Thanks

The bonus is to low and the royalty is not real bad but it should be at least 20% . The term is not good needs to b 3 years. How made you this offer ?

I have mineral rights in 142-105 Sections 19 & 30. Are they in that area or have they bypassed it all together? We did get an offer to resign our lease but the landman refused to do it for 3 years and pretty much blew us off after that. We did have an attorney doing our negotiations for us but I felt that, at the time, they were not seriously looking for signers unless we met their terms.

Aurora is leasing in that area...but you may be better to go direct with Empire or Whiting.

I leased in that area a year ago. Terms were pretty decent, 5 year lease (non-renewable), $250 per acre bonus, and 19% royalty.

You can probably do better, but we were satisfied with the deal.

Martha, there is a short lateral well drilled by Whiting in the Red River formation in section 21 just south of you. It seems a pretty poor well but appearances can be deceiving. It may take years to figure out how best to complete a well and make a profit. The question is, do you want the first well on your block or do you want the best, most profitable well on your block? To get the best most profitable well may require allowing all the others nearby to act as the guinea pigs for a few years.

Peak Oil, where we use more oil than we can find and produce is no joke and it's not that many years away. Every barrel of oil that is sold at $90 a barrel is going to be a barrel of oil that will not be sold at $200 per barrel. Think about it.

Martha Adkisson said:

I have mineral rights in 142-105 Sections 19 & 30. Are they in that area or have they bypassed it all together? We did get an offer to resign our lease but the landman refused to do it for 3 years and pretty much blew us off after that. We did have an attorney doing our negotiations for us but I felt that, at the time, they were not seriously looking for signers unless we met their terms.

Thank you for your responses. I agree with you RW. One of my sisters and some cousins did sign at the lower rate that was being offered and another sister and myself decided to wait. My feeling is that they will come back sooner or later, but it's been a year now and I started to wonder if they went ahead and drilled without contacting us again. I guess it takes patience and keeping my options open. Thanks again!

Martha, I don't even see a permit in your spacing yet and in your place I would be glad that someone else is being the guinea pigs. Some of it comes down to timing. Whiting is a competent operator but there is a learning curve even for them.

Martha, I also noticed that your sections are a little undersized being on the Mt/ND border, that means fewer acres may be sharing the royalty which is a very good thing.

Your best deal is to do a working interest instead of a lease. Even the best lease will never pay out as much as a working interest. A good lease today in GV could be up to $2000.00 per acres with a 20% + for three years.
The longer you wait the better deal you will get the best lease is the last lease. Since they are not drilling in your area I would wait. Patience is your friend.
But the best deal by far is NOT TO LEASE ...DO A WORKING INTEREST. KEEP ALL THE MONEY FROM YOUR SHARE OF THE WELL INSTEAD OF JUST 20%
Also if you lease you'll get at least 20% royalty. Which means you be paid for 20% of your oil and the land man or oil company will get the other 80% and they will do a working interest for 80% of your oil back to the oil company.
But if you do a working interest than you get 100% of all of the revenue your share produces forever per well.