Williams County, North Dakota: Going Rate for bonus and royalty

Hello all:

My mom and uncle each hold 80 acres of mineral rights on 153n-102w-31, this is southwest of Williston. Brigham Exploration currently holds the lease that expires in September. Today they received a letter explaining that Brigham currently has 300,000 acres under lease and can not get things drilled within the life of the lease. They included an offer of a 3/16 royalty and $1500 bonus for a three year extention. I have heard people are holding out and getting $2000-2500 bonus with a 20-25% royalty. Just wonder what you all think of this offer. They have 14 days to respond.

Also I was looking at the NDIC hearing docket and saw that EOG Resources filed an application to pool all interest in a spacing unit that contains 153n-102w sections 30 and 31. I am wondering what this means. I had thought it meant that Brigham had sold the lease to EOG but now I have no clue. Any ideas.

My brothers and I live we live out of state and want what is best for our mother and uncle.


J Downie

Mr. Downie:

I would guess that the $1500 bonus is fair although you might get a bit more depending on their need for this extension. I would be more concerned with the royalty as 20% is the going rate for this area. In the past, I always put more emphasis on the royalty than the bonus as this is where you're long term money will come from. A three year extension would be the maximum.

J, your familiy members leases may not be the only ones expiring in this time period, nor is it unusual for more than one operator to actively lease a spacing and compete to be the one to drill it. EOG may have the lions share of the acres in your spacing right now, but not necessarily. A permit to drill a spacing only cost $100 or about 8 cents an acre, and are generally granted if you pay the fee. If Brighams position is larger, greater acreage in the spacing, Brigham can protest EOG's permit. In your position I would offer both operators the opportunity to make an offer for your family acres, if combined your family controlls 160 net acres, the decision who drills your spacing may be in your hands. I looked at well production of wells in you area and while not monsters, they are good solid wells. I would definitely want 20% royalty and I would definitely offer the acres to both operating companies. When it comes to bonus, remember that those that do not ask, do not get. I suppose you could start the negotiations at $2500 per acre and see what counter offers you get. Good luck to you.