I have done an extensive amount of research on oil and gas leases lately. I don’t see much in terms of voluntary, statutory, compulsory, or force pooling.
I have found lots of information on negotiating a lease, articles that basically state negotiating a lease is your only option, and many articles that state it is in both your interest and the oil/gas companies interest to sign a lease.
I find it hard to believe that in every circumstance it is in both parties interest to sign a lease.
In my circumstance there are two wells that have been drilled and shut-in. The oil company is now looking to get leases signed that are not already signed before putting the wells into production.
If the oil/gas company has already completed the wells, and they are looking to put them into production; is there a chance you could see larger gains from owning a portion of the mineral rights to the wells rather than signing a contract that would minimize your mineral rights.
Long story short, I am located in Texas and have less than 5% of the mineral rights for the unit.
I have the same question and was hoping someone knowledgeable would answer your post.
My understanding is that if you don’t sign, they will recover the cost of the well before starting to pay you, however, if it’s a good well you could end up with a lot more money in the long run as you will have 8/8 of your original interest x “total production sold - well cost”instead of 20% of 8/8 x total production sold.
The thing that could significantly impact a pro/con calculation for not leasing is how they allocate the unit’s horizontal well production to the tract you own executive interest in.
If it’s the same or greater proportion than “your tract-acres/total unit acres” it seems it would be advantageous to not lease.
Am I missing something?
Keep in mind that even shallow wells have become very expensive to drill and complete. Thus, if you come in as a working interest, it may be a very long time before your share of these costs have been paid and you actually receive income. Secondly: keep in mind the present value of those future royalties: when you discount those future royalties to their value today, they are worth a lot less.
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