Hi all! This is my first post. I have a small (20acre) pecan farm in Johnston County (Ravia) in Oklahoma. My neighbor owns 10 acres on my North side and she was recently offered $500/acre lease for minerals followed by an offer by a venture group for $2500/acre to buy mineral rights. I was offered the same $500/acre from the same landman from Edmond, OK though I don’t know what the specifics of the lease offer is yet. Last year a company (don’t know which) performed massive 3D seismic testing of the area but I didn’t pay much attention at the time. It seems to me that somebody knows something about my area and intentions. I’m new at this so any guidance would be extremely helpful.
Billy:
First, if you are ever contacted in regards to selling your minerals, you need to refuse as this small amount of acreage could mean thousands of dollars in the future if a well or wells are drilled. Second, it is not uncommon for 3D seismic tests to be conducted as usually oil companies utilize this data to determine the boundaries of a shale play or a determining factor on where future wells will be drilled. I'm not familiar with this area in Oklahoma, so I can't say if the $500/acre is fair. I can tell you that when negotiating a lease, shop around and do your homework to get the best % royalty and the shortest term (preferably not more than 3 years). Also, you may want to address surface damages in a document in the event damage occurs to your pecan orchard as a result of drilling operations. You can find other posts on this forum that addresses contents of leases such as Pugh Clauses, etc. Just do your homework and know what you are signing when the lease is being finalized.
Billy, I was offered over $600 per acre to lease mineral rights roughly six miles south of you a month ago. Also, PLEASE DON'T SELL!!!!!! If a well is drilled, even at today's low gas prices, you can expect to make about $2-400 per year per acre over the life of the well. Wells do decrease production but this new kind of well is expected to produce for decades. They are offering you maybe 7 years worth of royalties on a single well to buy your mineral rights. Also, there are probably six more zones or geological strata that can be drilled under your acreage. There are ways to drill more than one well in a section and "fracc" them all at once to increase the production of each. So there are a lot of potential multipliers on your income and if you sell the buyers (or more likely their clients) will reap those profits. Leases are a tiny portion of the cost of a well.
You can probably tell that the royalty, or fraction of production, that they offer you is more important if a well is drilled than the up front bonus money (the $500 per acre offered). If you don't think a well will be drilled, then settling for 1/8 royalties and a bigger bonus is fine. I think the best deal royalty wise is going to be 1/4 royalties and zero bonus in "our" general area.
Excellent resources include the Oklahoma Corporation Commission website. Records about every well in the state are available in their databases on-line. And if you have about $500 to spare, join NARO's Oklahoma chapter and come to the annual convention in Tulsa at the beginning of May. You will learn tons. Sorry if these are linked elsewhere in this website, I just joined and have not explored everything yet.
Thanks for the info. I have studied up on this and have found good information. I also have no intentions of selling my mineral rights at any price. I would like to accept some bonus money but I’m more interested to know if wells are being planned. I believe Chesapeake does alot of drilling in my county. Has anybody dealt with Continental Land, LLC out of Edmond, OK?
If a well or wells is/are imminent, OCC regulations under Oklahoma state law requires the potential driller to notify all mineral rights owners in the requested spacing, which is almost always a section. Until the driller files for the spacing and pooling order they can and do keep their plans secret. I surf the web using Google advanced searches twice per week to see what if anything is being discussed in my area and in Woodford Shale in Oklahoma in particular. Some companies brag about specific wells, but most just talk about all their activities in aggregate. Mostly they seem to me to be trying to raise investment funds in either case. Chesapeake does drill wells but their CEO Aubrey McClendon brags about how much he makes leasing rights and then selling the leases to others. I have not worked with Continental Land. “Our” area is best known for dry gas, and with gas price so low, drillers want to drill where there is a better chance of oil and other liquids. However there are pockets of oil even in our area, which is sometimes called the Ardmore Basin. So the seismic may have revealed something interesting around you. Another issue is a pipeline to take the gas. There is that east-west pipeline that crosses the highway north of Ravia (sorry I don’t remember its number right now) but it seems to be operating at capacity. Atlas built their Velma to Madill pipeline and finished it last year or so, but I don’t think it crosses to the Ravia side of the Washita. But since you live there and I only make it back once or twice per year, you would know if someone has buried a new pipeline somewhere around Ravia. And if you would forgive one more piece of free advice, you can go to the courthouse in Tishomingo and search the property records for other leases in your area. Usually the landmen put the bonus offer in the cover letter and not the lease they file in the courthouse, but you can tell how serious landmen are about your section and you can see which other land companies may be working your area. Good luck! Information is at least a tiny bit of power in the O & G game.
Billy Asbery said:
Thanks for the info. I have studied up on this and have found good information. I also have no intentions of selling my mineral rights at any price. I would like to accept some bonus money but I'm more interested to know if wells are being planned. I believe Chesapeake does alot of drilling in my county. Has anybody dealt with Continental Land, LLC out of Edmond, OK?
Mr. Cooper, I appreciate your input. There was a 16" pipeline put in last year that runs north/south just west outside Ravia. That was contructed shortly after all the seismic testing. Since the turn of the year, leasing offers went from $175/acre to $500/acre. Seems that those factors are not just coincidence.
Continental Land, LLC is suppose to get my lease offer to me within the next two weeks. They conveyed over the phone their offer of $500/acre with 3/16 royalty. Considering they are a landman company should I contact the energy companies and deal directly with them?
I apologize for my log-in name, I am a little leery of on-line discussions and only put in minimal personal info. Actually I am one of three sisters who inherited mineral rights only. Our parcels are north of Mannsville and across the highway from the Madill airport. I just got another lease offer today on a Marshall section, it was the same as your offer. And I am certain you are right about the seismic testing and the new pipeline making your property more attractive.
As for contacting the energy company directly, I cannot see how it would hurt. I am sure that Continental is being paid by the energy company to do their land work, and if you can find out who they are representing you could give it a try. The only time I ever have gone around the landman is recently when I had a bone to pick over how some of my leases were recorded. They spelled my name wrong and would not correct it back then. I only knew who the energy company was because they were filing to drill and the OCC makes them notify all owners on the filing. The energy company was quite gracious and the landman has been careful to spell my name right ever since. Sometimes I think some of the landmen are borderline dishonest in their offers. Possibly some landmen have a budget under which to obtain the leases and get to keep all or part of what they can save keeping the lease offers low. I don't know that for a fact but I have found out later that I took sometimes much less than others were getting in my area. Here is where this website, NARO, and maybe even meeting with the neighbors can help. Go for it and see what answer they give. The worst they can do is refer you back to their contract landman.
Ms. Cooper, I appreciate the information. From all the articles I’ve been able to find it seems the Woodford Shale in our area is about to heat up. Good luck to all.
More interesting info from my neighbor who owns the 10 acres on my Northeast side: She has a natural gas line running right across her South five acres that ONG put in a few years ago. Talk about an easy hookup if drilling happens on my 20 acres.
Also, there was a large drill pad built on my neighbor's land to the South of me in 2009 but the O&G company allowed the lease to expire after extending it for another six months. I have never learned why operations were ceased as that neighbor lives in Texas. His name is Earnest Mahard (Jasper, TX) but I've never seen him around to ask him what happened to the drill site. I believe his farm covers about 80 acres on my South side but South of him is public land around the Washita River. Some of the mapping I've seen of the shale is 600 feet thick in our area. Seems they could produce much dry gas with fracing.
That is good news for you. Drilling can start almost anywhere, even not on your section, and by directional drilling the bottom of the hole (where they turn and drill sideways) can be right where it has to be in your section. They could even drill multiple wells from basically the same drill pad. I can only speculate on why that drill pad was never used. It could be that when the economy tanked they could not get financing to drill. They could have put the drill pad in to keep their leases past the original expiration date by just paying the same they paid for the lease to start with. That 600 feet of Woodford Shale sounds like great news in the long run but right now gas is so low (between $3 and $4 per thousand cubic feet or mcf) that gas is just in the way when they drill for oil which is the moneymaker at the moment. My first well never has been fracced and it was drilled three years ago! http://www.searchanddiscovery.net/abstracts/pdf/2011/hedberg-texas/… is an interesting article by the Oklahoma Geological Survey expert on Woodford Shale’s byproducts. Fortunately there are pockets of fairly high oil content shale in our area, the Ardmore Basin. That is the best hope for a drilled well in the short run from what I read. Keep talking to neighbors. You might ask and see if you can get higher royalty or a restriction to lease only the first zone they drill to as there are probably 6 more zones that will produce someday . If you can afford to participate even an acre in the well you will get all the well drilling info and much more income than just the owner royalty share. Of course that is up to you and you might then want to form an LLC to protect you from liability if something goes wrong with the well. Forgive me for free advice, we know what that is worth!! But just some ideas to explore and see if they appeal to you. abstracts/ndx_cardott.pdf is the rest of the reference above, can’t understand why it would not all paste.
Billy Asbery said:
More interesting info from my neighbor who owns the 10 acres on my Northeast side: She has a natural gas line running right across her South five acres that ONG put in a few years ago. Talk about an easy hookup if drilling happens on my 20 acres.
Also, there was a large drill pad built on my neighbor's land to the South of me in 2009 but the O&G company allowed the lease to expire after extending it for another six months. I have never learned why operations were ceased as that neighbor lives in Texas. His name is Earnest Mahard (Jasper, TX) but I've never seen him around to ask him what happened to the drill site. I believe his farm covers about 80 acres on my South side but South of him is public land around the Washita River. Some of the mapping I've seen of the shale is 600 feet thick in our area. Seems they could produce much dry gas with fracing.
I believe that drilling in my section is imminent and I just read today that Oklahoma has approved a drop from 640 to 80 acres for drilling units. This Woodford Shale is heating up (no pun intended)!
Ms. Cooper, I appreciate the input and information.
Johnston County has a fraction of the wells compared to bordering counties. 2011 will be a breakout year for our county (gut feeling) with Oil&Gas drilling/production. I've uncovered to many coincidences pointing in that direction to just ignore. My research, even to the beginner, is profound in content.
Billy:
I agree with your comment that 2011 should be a breakout year in regards to drilling activity in the major shale plays. I believe we will be seeing up to doulble the rig activity in these areas as expiration dates on leases in "hot" areas looms this year and next. I also believe that we will see several change of operators over the next couple of years in some of these areas as we already have had in the Bakken Shale area. This is setting up to be an interesting next several years.
Billy Asbery said:
I believe that drilling in my section is imminent and I just read today that Oklahoma has approved a drop from 640 to 80 acres for drilling units. This Woodford Shale is heating up (no pun intended)!
Ms. Cooper, I appreciate the input and information.
Johnston County has a fraction of the wells compared to bordering counties. 2011 will be a breakout year for our county (gut feeling) with Oil&Gas drilling/production. I've uncovered to many coincidences pointing in that direction to just ignore. My research, even to the beginner, is profound in content.
I received a lease offer today from Continental Land Resources, LLC for Chesapeake Exploration, LLC. The offer is for $600 per net mineral acre for three years with a 3/16th's royalty. Paragraph 2 expresses royalties paid to lessor free of cost for oil, condensate and distillates. But paragraph 3 outlines a 3/16th's royality to lessor for gas (including gasinghead gas) of proceeds realized by lessee from the sale thereof, less a proportionate part of the production, severance and other excise taxes and the cost incurred by lessee in processing, gathering, treating, compressing, dehydrating, transporting, and marketing, or otherwise making such gas or other substances ready for sale or use, said payments to be made monthly.
It seems like to me that the plan is for gas not oil. Why else would they want me to share in the cost associated with gas production? Paragraph 3 doesn't seem like a wise deal for me. Any comments would be appreciated. Would it be money well spent to take this to an O&G attorney?
I have been taking my lease offers to an attorney. I have used three lawyers and been happy with two. I felt that the one had a conflict of interest because that one represented the land company seeking to lease with me. The second was very very good but had to back out of recent legal questions because of representing the company wishing to drill. I will use that one again. He recommended the other attorney I have been happy with. The $600 is good news but more than offset in the long run by the costs subtracted from the royalty. I think you could ask for and get no deduction for operating costs. My understanding is that by law they cannot deduct anything from the first 1/8 royalty share. After talking to the second good lawyer I have decided that unless I can get all the lease clauses ("exceptions", some call them) to read like I want, I have nothing to lose by waiting until some driller gets a spacing and pooling order from the OCC, because at that time they are required to make me the best lease offer anyone has received on that section or any section immediately next to it. Remember I do not care what the bonus is, only the royalty or a limit to the zone (legal word for geologic stratum) they get production from. I want a chance to participate in the next well in a different formation if I have to lease at all. To kind of expand on what I mentioned earlier, you can expect to average $200 dollars per year per acre for 20 years if you lease and gas stays around $3 per mcf. If you have around $8000 per acre to invest in participating instead of leasing, you can expect around $1200 per acre per year. That will pay you back in 7 years. Some companies are bragging that their initial production rates usually pay off the whole well drilling and fraccing expense in the first year, but they all drop off to the average 1000 mcf per day. I know a geologist from Midland-Odessa who believes these shale wells could produce for 100 years. Who knows. I also know that the last time oil went over $100 per barrel, gas prices followed it up, and the luckiest people at the top of the speculation bubble got over $25,000 per acre bonus. It takes a gas price of $5-6 per mcf to really make a gas well worthwhile. Even though gas storage has dropped, and lower supply supposedly raises prices, prices have actually fallen all winter. Not sure what is going on with that. Since "our" wells average 1000 mcf per day after the initial production drops off, that comes out to $3000 per day for an average well's gas, before expenses which OCC says averages 30%. If they can get 30 barrels of oil per day out of a lucky well in our area, that is the same dollars per day for double the gross. So you can see that until gas comes back up, they are only going to drill where indications show oil. Another factor that makes bonus less important than royalty is the possibility of more wells into the same zone as the first well. The more wells closer together makes a better overall frac for each of them. And not one penny more of bonus for more wells! Only the royalties multiply with multiple wells. So I am taking the long view and hoping either for more royalties or an investor's share.
And I thought of a clause you might want since you own the surface: all the raw gas you can use, if you can burn raw gas.
Billy Asbery said:
I received a lease offer today from Continental Land Resources, LLC for Chesapeake Exploration, LLC. The offer is for $600 per net mineral acre for three years with a 3/16th's royalty. Paragraph 2 expresses royalties paid to lessor free of cost for oil, condensate and distillates. But paragraph 3 outlines a 3/16th's royality to lessor for gas (including gasinghead gas) of proceeds realized by lessee from the sale thereof, less a proportionate part of the production, severance and other excise taxes and the cost incurred by lessee in processing, gathering, treating, compressing, dehydrating, transporting, and marketing, or otherwise making such gas or other substances ready for sale or use, said payments to be made monthly.
It seems like to me that the plan is for gas not oil. Why else would they want me to share in the cost associated with gas production? Paragraph 3 doesn't seem like a wise deal for me. Any comments would be appreciated. Would it be money well spent to take this to an O&G attorney?
I have some land in 4S 4E range section 21 jus nw of Mannesville. XTO - Exon Mobile has a 3/16 lease on my family’s acreage there. I hear about activity there but with horizontal drilling it could be starting anywhere. Anyone know of activity in that area?
My sisters and I have a well under the Mannsville blocks we have an interest in. I have not received any information from my participation about the drilling but the permit was given months ago. It is XTO.
Have you ever gotten into the Oklahoma Corporation Commission website and looked up your property in their databases? If you or the family member with the ownership of record have received legal notification required by OCC about a permit application, you can look it up by the cause number in one database. The other database can be searched by section township and range. It is a little complicated to get into but it is a gold mine of information.
No, paragraph 3 is not a good deal for you. 3/16 royalty doesn’t sound that great either. Do not attempt a do-it-yourself lease. Please consult with a qualified oil and gas attorney. Before discussing anything with them, ask if they have represented or do they currently represent Chesapeake? If possible, I prefer to find an attorney who primarily represents mineral owners. I believe they are more objective. A good O&G attorney should be aware of what is being paid in the area.
Billy Asbery said:
I received a lease offer today from Continental Land Resources, LLC for Chesapeake Exploration, LLC. The offer is for $600 per net mineral acre for three years with a 3/16th's royalty. Paragraph 2 expresses royalties paid to lessor free of cost for oil, condensate and distillates. But paragraph 3 outlines a 3/16th's royality to lessor for gas (including gasinghead gas) of proceeds realized by lessee from the sale thereof, less a proportionate part of the production, severance and other excise taxes and the cost incurred by lessee in processing, gathering, treating, compressing, dehydrating, transporting, and marketing, or otherwise making such gas or other substances ready for sale or use, said payments to be made monthly.
It seems like to me that the plan is for gas not oil. Why else would they want me to share in the cost associated with gas production? Paragraph 3 doesn't seem like a wise deal for me. Any comments would be appreciated. Would it be money well spent to take this to an O&G attorney?
HOW FAR SOUTH AND EAST DOES DRILLING EXTEND TO? I HAVE 5 ACRES NORT OF PLATTER.
charles s mallory said:
Billy:
I agree with your comment that 2011 should be a breakout year in regards to drilling activity in the major shale plays. I believe we will be seeing up to doulble the rig activity in these areas as expiration dates on leases in "hot" areas looms this year and next. I also believe that we will see several change of operators over the next couple of years in some of these areas as we already have had in the Bakken Shale area. This is setting up to be an interesting next several years.
Billy Asbery said:I believe that drilling in my section is imminent and I just read today that Oklahoma has approved a drop from 640 to 80 acres for drilling units. This Woodford Shale is heating up (no pun intended)!
Ms. Cooper, I appreciate the input and information.
Johnston County has a fraction of the wells compared to bordering counties. 2011 will be a breakout year for our county (gut feeling) with Oil&Gas drilling/production. I've uncovered to many coincidences pointing in that direction to just ignore. My research, even to the beginner, is profound in content.
Bonus offers have gone up to $925/acre in Section 10 4S 5E of Johnston County with a 3/16th royalty offer. I will attempt to negotiate 1/4th royalty as there is an 80 acre tract on my West side that has negotiated a sweet lease contract. I received notice from Chesapeake about two week ago that they will be filing for a drilling permit for my section and provided me with a proposed budget for drilling costs.
I will consult with an O&G attorney to negotiate my lease terms.
Anybody with interests in Johnston County, Oklahoma have anything to add to this? Thank you all.