Texican and anyone else who knows: oil/gas lease question

That isn't true everywhere. Some places only regulate where the well head is.

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There is only one certain barrier to truth, the conviction that you already have it- Unknown

sure makes me think you must be VVIP (very very important person)

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Yet another update:

DH was talking to his buddy in middle management at Weatherford again today and basically asked why they care about us.
"You have the oil. I'll bet my left arm."

When DH pointed out that they haven't done any specific seismographing or anything beyond gas wells several miles away in any direction, how can they be so sure, he said they can do it from the air, too. (??)


Oh wow...

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~*~Erin~*~
SAHM, ranch wife, sub and quilt shop proprietress
the Back Gate Country Quilt Shop

I stand corrected.

Don't take any weatherford hand's word for anything other than what directly work with. Middle management is an even bigger red flag. They are on the service end of the oilfield not the production. Don't ask me how I know. Just take my word for it.


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I'm not taking a "weatherford hand's word" for anything... My husband is talking to a friend, who has been in various corners of the oil industry, all over the high plains, for the past 30 years.
At the moment, he just happens to be working for a frac company.


So far as thinking we have oil, I think it's kind of a "duh" that a gut feeling isn't exactly something you want to bet the farm on, don't you?
Or do you mean that they CAN'T do seismic searches from the air?

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~*~Erin~*~
SAHM, ranch wife, sub and quilt shop proprietress
the Back Gate Country Quilt Shop

I wasn't saying it in a snarky way. Weatherford has some outstanding employees. That was just the point of reference you used. If you know his background then he may be well qualified to help.

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Oil and gas researchers just came through my entire area doing seismic drilling. (4" diameter X 20' deep X 2lb charges)

They done 20 sections of land that was 4 sections wide and 5 sections deep.

They came in and offered $10 per acre for just the right to do seismic research. ANY landowner that held out was left out. The land man that approached the first time left an offer for exploration lease paperwork and never called again unless you called him. It was a take it or leave it deal. I signed at the ninth hour but know several landowners who didn't. Whether they had 5 acres or 500 acres didn't matter. EVERYONE who signed got $10 per acre for the right to seismic drill.

This has/had nothing to do with future drilling for prospective oil. No one leased the right to drill. This was simply paying for surface damage caused by the seismic crews which was almost none.

If you want to get the most for your oil/gas lease tell your landman you want the "Favored Nations" clause included in your lease. I know very little about it but it basically says that if anyone in your area under the same company gets more money than you do on this deal they have to match you with the money amount of the highest awardee. (I think???)

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Francismilker

"The effectual fervent prayer of a righteous man availeth much" James 5:16

Latest update:

Nope, this isn't for research. This is for production.

He was here again. (not sure why, but he walks up the driveway. I still don't know what his vehicle is because he parks down by the county road, around the corner from the house...)

**He told me the same lease terms he told DH on the phone; $15/3yrs, $25/5 and 1/8 production royalties (12.5%) He said he knew that wasn't what they were giving in ND and I said nope, but I realize it's not quite a valuable down here. However there's a pretty wide margin between $25ac. and $1500.
To 12.5%, he kept trying to tell me there are "stripper wells" here that are only making 10bbl/d so the companies are putting more in and can't pay back as well as they do in higher production areas. I said I hadn't found any of those listed at the state Geologic Survey's site. They were usually 60-80... Then he said he didn't know of too many in the 80 range but yeah, 60 was common. (I threw in 80 to see what he'd say)
However, sixty is a bit different than 10...

**I told him I wasn't sure it was worth it for us. Even $25 only comes to $1000 for our little place. He started to say something else but I could see him modifying his comment as he spoke and instead said that if we held out, someone might come in later and offer more or we might just miss out.
He also said they couldn't offer more because then they'd be unpopular with everyone else.
I just shrugged and said that seems to be the way oil works some times.

**I asked why he was so interested in our little place. I'd heard from half a dozen different neighbors that he'd been looking for us. He said it was probably all on the same day. pause Well, if you have the oil, we're going to be very interested.
And most of the land around us is currently in gas leases, or even in production, right?
Well, yeah...

**I told him we're very interested in leasing, but we sure don't want to low-ball ourselves so we're doing a LOT of research. And $25/5yrs and 12.5% seems REALLY low. "Well that's what we've always paid here in Kansas." And I said uh-huh. Because we don't know the difference here.
Well, yeah...
He's back to wanting to have a sit-down again when DH is home. (Whom I haven't talked to yet today to see if the landboy called him yet, too lol)

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~*~Erin~*~
SAHM, ranch wife, sub and quilt shop proprietress
the Back Gate Country Quilt Shop

12.5 percent doesn't seem low. The people I know with royalties are no where near that high. Also, production isn't absolute. Initial production may be 60 bbls a day but it ALWAYS goes down. It may start at 500 or 1000 bbls per day and 10 bbls may be what they expect to average over the life of the well. Keep in mind, there will be days or weeks of zero production.

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There is only one certain barrier to truth, the conviction that you already have it- Unknown

1/8th royalty? This guy is a flipper... I know of no one executing a new lease that gets offered 1/8th. 1/8th use to be 'standard', for decades.... Independent Landmen would lease for 1/8th, bundle a bunch of leases together, transfer them to someone that actually could drill, double, triple, or quadruple their money, plus get 1/8th override interest for theirselves.

I have a client in Central Texas negotiating a lease for a multiple formation lease (4 oil, 1 gas)... they're offering only 3K/acre. My client did not like it when I told her the people she was negotiating with had sold some acreage to an actual driller in the next county over, for 40k/acre. (some very HIGHLY productive oil formations)...

If I had a little extra cash, I'd offer you wayyyy more for your mineral leases, just to have some fun when they try and contacted me to lease them...

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Learning is not compulsory... neither is survival. W. Edwards Deming

I discovered one of my co-workers at the salebarn used to be the registrar of deeds until she retired (apparently that's whose office I should have visited on my courthouse day). And she has filed hundreds of oil/gas leases over the years.

She said 1/8 is indeed the typical royalty (most of the mineral leases in our county have been gas, if that's relevant) and that this land company is the usual rep. for Murfin drilling. "We're small potatoes up here, so they usually send their new guys. I swear they get younger every year."
But she also said that $5/acre (whether it be as $15/3yrs or $25/5) is awfully low for the lease bonus.

This is where I live:

http://wyomingenergynews.com/2013/02...e-next-bakken/ (They've been calling the Denver-Julesburg basin the "next Bakken" for a couple of years and so far that really hasn't panned out, except maybe for Weld county, CO.)

I'm on the very eastern tip there, of the Niobrara Shale (Denver-Julesburg basin) in the NW corner of KS.
There are NO big operators here, only the same couple of small drilling companies that have been here for decades. But those couple of small drilling companies have drilled 9 oil wells in the last year, just to the east of us. Seven of them are producing.

And, according to the article in my very first post, small, regional companies like this one are being pushed out of the major plays because they can't afford to compete with the big companies.
So I think the deal probably is on the up and up but we're just not sure we want to jump in this early in the game. If we hold out, it might get better?

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~*~Erin~*~
SAHM, ranch wife, sub and quilt shop proprietress
the Back Gate Country Quilt Shop

sounds to me like the higher prices sold there royalties not lease .