Like so many others on these forums I am new to all of this oil stuff. My husband and I inherited mineral rights out of the blue about two years ago.
With the good advice we gleaned from this forum we have been doing ok so far, i think, but now we have a few questions that we cant seem to find any answers for.
We have finally arrived at the actual oil production part of the process (yheaa!) and have no idea what to expect at this stage. We have a producing well in McKenzie County, ND that is doing 1,870 barrels (give or take a few) a day. Our portion of it is .00179005 with a 20% share thingie percentage ; )
The Well has been producing since Febuary 2012 and we have yet to recieve any checks. Can anyone give us any idea of what the check is likely to be? In a ball park? I know that there are many deductions and taxes that will come out of the proceeds and also that there can be quite a variation in the quality of the oil but we really don't know if we are looking forward to a check for $200.00 or $5,000 dollars. We also have gas rights but i no absolutely nothing about the value of that resource.
What has everyone experience been with percentage deductions from the value of the oil?
I have read elsewhere that on average these wells produce 1 Million barrels over their life time. Do you all find that 2 years of revenue is about it for the wells? Its so confusing because other sources say they are usually active for 5 - 30 years.
What has everyones experience been with taxes? Do you recommend we see a tax accountant that specializes in mineral rights?
I have also read that any revenue from these oil wells can be, and often is, quite irregular and unreliable in the extreme. Has that been everyones experience?
Hello Britta, I will try to answer in order. McKenzie county has some good wells but most will decline rather quickly from that 1870 bbl a day. The operator by law has 150 days from first sales, not production, to pay you or they owe you interest, as long as you have excellent title. Any blemish on your title and they don't have to pay you, or pay interest when they do pay, after you fix your title. If your title is bad they could hold your money in suspense for years, until you clean up your title. I hope your title is good. I don't want to hazard a guess as to what your checks would be because the price of oil has been fluctuating quite a bit and I don't know if your well really is doing 1870 bbl a day or not; it could be as low as 500 bbl a day after 4 months, the well could have been shut in for any number of reasons. My oil sold for $84 a barrel in May but I heard of the price being as low as $55 in june. Just too many factors to tell. As a lessor, I don't think you really need a CPA unless you usually use one anyway. Britta, the checks can vary widely. Your well could be shut in because someone else is fracking nearby, at some point your well will probably get a pump and be shut down temporarily, storms ,floods, snow, bad roads and lack of carry away capacity can slow or shut down your well, so don't spend it all in one place. I hope your well is even better than you think, but if you want to know the production up to May, which is the last month I can get data for, If you tell me the legal description ie township, range and section, I will look up the production for you then possibly we could take a rough stab at figuring the range of what you could have coming.
Thank you for your response R.W. I guess I really didn't expect anyone to be able to give us a ball park number but i thought it was worth asking anyway just in case.
Yes the title should be fine as we hired a local Minot Mineral resource Lawyer do all necessary research and discovery during every phase of this process.
Im afraid the well is still under "confidential" status so we haven't been able to get any further production information other than that initial report that was included in the Whiting company quartly financial report. Really we just stumbled on the information accidentally.
"...Of note at Hidden Bench is the recent completion of the Tifft 21-18H. This well was completed in the Middle Bakken formation on February 3, 2012 flowing 1,872 BOE per day."
I will subscribe to the website that gives daily production number when the well comes out of its confidential status. Till then the only information we have is the quote above ; (
Gosh I just hope we at least make the lawyers fees back : )
Britta, lawyers are expensive, but if your well IP'D at 1872 boe, I think you will get your lawyers fee back fairly quick if you didn't spend more than $5000. Britta, IP numbers are advertising, BOE is including the gas equivalent of oil which the greater part of sells for alot less than the oil. Often the gas is flared for several months and not sold and the lessor will not be paid for this gas. I think the operator may be able to deduct this gas as a loss from his taxes. Just for general information, I have a well that IP'd at 2698 and the operator quickly lowered production to 1175 bbl a day. I think most operators choke the well back for the good of the well and greater eventual recovery. The gas in ND seems to be very rich and I have seen mine sell for $4 or $5 per mcf while the commodity price was less than $3. Your well could be off confidential now. While all permits are confidential, the true confidential time doesn't begin until they start drilling or until they reach total depth. Many wells come off the confidential list before they are fracked/completed and your well has been producing since february so a month or two should tell the tale since the well comes off confidential on 8-1. Good luck with your well.