We have some small interest in 2 EOG wells in San Augustine Co.   We have received an offer to purchase our royalty interests from Montego Minerals in Midland, TX.  The offer seems to be for the sum total of what we have received in royalty payments up to this point.  Has anyone else heard of this company.

We understand that there is only one well per unit on these two locations and there is potential for 2 more wells per unit.  But we don't know what EOG's plans are for the future.

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there may also be potentially productive shallow or deeper zones

I'm gonna impart upon you a saying my father often uses. "Do you wanna make a fast nickel, or a slow dime?"

JWD, Have you considered selling half of your interest.  That would provide some cash and allow you to keep half of your minerals for when the economy turns around.

Another factor would be where in the county the minerals are located as some areas are better than others.

We want to thank everyone for their input.  As far as need, there is not much at this time.  As I mentioned it is a small share, (pocket money) someone said.  We are trying to make good decisions.

So here is a little more info.  Maybe some of you have similar interests.

EOG

San Augustine County

1. Chinaberry 1H   % Interest   .00123789  approx.  45 acres

2. Phelps 1H    % Interest   .000637  approx. 40 acres

(Told you they were small :)

Again, thanks for every ones input.

Interesting.  Just saw your post.  I received a similar offer to buy my interests in the same two EOG wells, but it was about two weeks ago and it was from San Saba Royalty.

My thoughts:  if they are willing to pay out dollars now to acquire mineral rights on wells that are not paying out much, then must know something we do not.  The Phelps pad site is on my property, and I do know EOG paid for rights to drill two more wells on the same site in the future.

Unfortunately cannot remember their offer details, as I trashed it as I do all such solicitations to purchase.

For the sake of clarity, if EOG, or any other operator, has a producing well in a state approved unit the leases are held in force and the operator may drill as many or as few wells as they choose within the spacing regulations imposed by the state.  Also in Texas unit boundaries can be amended over time to include more or less acreage.  An existing unit of 400 acres that would accommodate 2 wells today could be increased to 750 some time in the future and then might accommodate 4 wells. 

Generally speaking the vast number of purchase offers come from companies that perform various levels of due diligence and do not have access to proprietary information.  They have an acquisition model and they seek mineral interests that fit their parameters.  What they know, although I suspect you guys do also, is that hydrocarbons will rise in price in the future and when they do, more wells will be drilled.  The risk involved is how long in time and how much better the price.  A company like San Saba buys a lot of minerals and they don't expect every purchase to turn out as they hope.  However they are experienced and probably make a majority of their acquisitions in areas that ultimately have some amount of new development.  They are investing for the long term which could be a time horizon of decades.

We have had a couple more inquiries also, San Saba was one of them.  We are going to hold.  Looks like it going to be pretty hard to predict the future.  Whether EOG is going to hold on to these units and when they might decide to drill the other wells.

Same here... offering quite a bit of cash for existing wells... not in future development per the letter

cash for existing wells... not in future development

Bill R, you've been around GHS for nearly as long as I have so I know you have read lots about offers to buy minerals. I want you to ponder that statement and determine why such an arrangement would make good business sense to a buyer (hint: they'd have to be buying at a considerable discount to what they think the hole can still produce from the date of purchase). Just beware of tricky language in any such royalty deed so you don't inadvertently convey more than you intended.

Oh yeah.... I am getting more knowledgeable of the language and meanings of the O&G industry (thanks to many like you Jffree1)... I would never sell anything, but I found it interesting that some are now stating the offer is not for future development. That said, anytime I see something that sounds too good to be true, it usually is! 

Only one I still cannot figure out is the Atoka deal.... still listed as 'shut in' and getting my $1 per year going on 10 years now since the initial lease. But since it is only one little well with a small % sitting on a small parcel, it doesn't really bother me too much. 

Thanks for the insight!  >< ((((({ * ,>

jffree - Got an interesting letter... my Lawyer that I turned it over to says it is Extortion by Proxy(?)... The interested Representative of the Buyer stated the Buyer intends to purchase 50% of several of our existing wells for a 'set amount' and that if we did not agree to their terms that they would, "move forward with a Cease Production Writ, which would terminate all Production until such time as we agreed to said 'set amount' and that removal of Gases and Petro Chemicals would then be allowed as set forth by the Buyer."

Needless to say the Attorney I retained is very interested in this and is moving forward to 'meet with the buyer' for further details.  He stated this is a blatant Act of Extortion by both the Buyer and his Representative. Also stated that this was a common practice in the late 20's and 30's in the Southern States.

Should anyone receive a similar letter, our Attorney recommends contacting Legal Counsel immediately and said, "do not sign or verbally agree to anything"!

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