HELP!! NO clue: Non-participating royalty interest???

I, my 4 siblings and Uncle (recently deased), now 3 cousins apparently have a non-participating interest in 42 acres on a 550 acre unit. We signed an Acknowledgment and Ratification of Oil, Gas and Minerals Lease??? What did we sign, as we knew nothing about any of this before getting paperwork in Mar 2010?

The land is part of the Nathan Davis Survey, A-147. Suppossedly 13-17 mi SE of Central, west of Shelby?? Thee was something about Cr 1095 & 1097 or 1098 also. Our part is 42 acres of a 550 acre unit. Or so I am told. I was also told that the first well "came in" after about 60 days and 2 others after that? How do I find out what they are doing-- ie production..whatever?

 

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Oil & Gas ProPermalink Reply by Dan Arnold on October 29, 2010 at 4:58
There are several questions here. Let me address the non-participating royalty interest (NPRI). What this means is that you and others in your family own some royalty interest in the 42.00 acres of land. It is called NPRI because at some point in the past, some royalty interest was conveyed, or reserved, without the right to negotiate leases, or derive income from lease bonuses. Your interest is royalty only, which means the only income you get from any of the leases taken over the years, is a portion of the income from a producing well. The person(s) who has/have the lease rights get income in the form of bonus money every time they sign a lease, whether a well is actually drilled or not.
You ratified an existing lease, because you have royalty interest in the unit. This is simply you acknowledging that you as a royalty owner have knowledge of the lease and you are participating in the (hopeful) production from the well.
It sounds as if you will be getting some income from the well(s). How much income will be based on numerous factors like how much royalty interest you have in the 42.00 acres ( a pretty small part of the 550.00 acre unit), the production from the well(s), the market price of the resource, and a whole host of other things.

Oil & Gas ProPermalink Reply by G. Knomes on October 29, 2010 at 5:11
I have attached the permit (see the plat with the acreage description) of a well that is probably the one that you have an NPRI in. There is no public data, yet, for the results of this well (will be available at the railroad commission about 30 days after they start selling gas). Assuming the permit that I have attached is your well, the company is SM Energy (old name was St Marys Land) and they should be sending you a division order to sign (usually within about 90 days after they complete the well). Sign this and send it back asap so you can get paid. Once you see the division order you will know which well(s) you will be getting paid from. Being that you are only a NPRI owner (with no executive rights) and have not made the original lease with the company, there is not much else you can do except wait.

Difficult to speculate what the amount will be but the average well in that area will make about $1,000,000 pe month (sometimes much more) and your 42 net acres is about a two percent share of the royalty. assuming a 1/4 royalty lease that means your 42 acre will pay you about $20k in the first month and then it will decline from there unless the price of natrl gas goes up. The first check will have two or three months of your revenue - so it will probably be the biggest one that you get.
Good Luck.
Attachments:

landownerPermalink Reply by ledlights on October 29, 2010 at 6:46
But that $20K, if correct, will be divided between the 4 siblings, right? Is it 42 acres per sibling or 42 acres total? Also, are there really enough producing Haynesville wells in that vicinity to come up with an average well production estimate?
Permalink Reply by jffree1 on October 29, 2010 at 8:46
No, to your last question. There are not.

Oil & Gas ProPermalink Reply by G. Knomes on October 29, 2010 at 9:24
That $20K would be total for the 42 net acres, but I'm not sure how they have the ownership within that group divided. As for the average production in the area - the average is more like 3 million cubic ft of gas per day - in the immediate area - but there are a few exceptional wells scattered around the greater southern Shelby co. The $1,000,000 per month I used is a WAG but I assumed an "upside" rate of 8 million cuft/day rate at $4/mcf to get to that gross (pre-tax) number.
Permalink Reply by jffree1 on October 29, 2010 at 9:28
ledlights, it is a 1/8 NPRI in the 42 acres further divided by all heirs of the grandmother, who made the reservation. I (seriously) would not expect a $20K check.

G. Knomes, from the production numbers I have collected from this area (and there aren't many) 8 MMcfd may still be over-optimistic. It is just too early to tell.

I don't question your intentions because I feel like you were trying to help. But I think it might be better to underestimate so that folks will get a nice surprise if their well out-performs estimates rather than to go overboard and have people sorely disappointed in the actual results. Or, worse yet, make big plans on money that could not ever materialize.

Oil & Gas ProPermalink Reply by G. Knomes on October 29, 2010 at 10:04
You are correct - that number is overly optimistic.
Permalink Reply by Jon Williamson on October 29, 2010 at 10:15
Hi Pamela

Congratulations you are in a producing gas unit and will recieve $$$. Heaven only knows what you signed. Ratifications usually are just ok terms for the owner or they can be really bad terms for the owner. The time to ask what you had done would have been before you signed it or at least sought an attorney. Anyway sounds like you are trying to get educated now. Good luck to you.
Permalink Reply by PamelaC on October 29, 2010 at 12:42
Jon,

So do you know when it started producing by chance?? I tried the TRR website and can't figure out where to put the API #

landownerPermalink Reply by FXEF on October 29, 2010 at 13:29
Pamela,

It's not producing.... Justiss Rig 54 is still drilling as of 10-29-2010, Baker Hughes Rig Count.

landownerPermalink Reply by benny688 on October 30, 2010 at 16:44
There was a time in the 1930s , similar to now, where suddenly people had no way to pay their mortgages. The solution at the time was to sell off the mineral interests to avoid foreclosure.

The use of the term "Non-participating royalty interest " generally means that although you may own all or part of the surface rights you no longer own the main portion of the mineral rights and your vote will be meaningless.

See Ron's post to understand what you can actually expect to receive from something like this.

glta
Permalink Reply by PamelaC on October 30, 2010 at 19:39
Steve

Out of curiosity I looked up Crockett #1. Blackstone BP #1 and Boone #1. I was confused about the boundry lines. For good reason it turns out. Can you please explain the following: Filed with Shelby Co.

Crockett #1 contains the exact leases (names and dates going back to 1938)that my sibs/cousins acknowledged/ ratified as 42 acre in 759.42 acre Unit. The ratification papers were not attached.

Boone #1 contains the ratification papers. 42 acres in 559.12 Acre Unit.

Call me confused!!

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