I was contacted this week about leasing property in the W. White survey off FM705. The initial offer is $400 p/acre bonus w/ 20% royalty. I politely countered with something more acceptable to me (if bonus is lowball, royalty will have to dramatically increase). I am not familiar with the company offering the lease. Another company (Red Hat) inquired about my A. Spear survey properties this week & an offer is forthcoming. Who else is getting contacted & what are reasonable expectations in the current market? In 2008, there was a wave of lower offers before the better offers came though. Could this be a similar situation?
Those who deal in buying minerals like to use a net mineral figure in offers because it is a higher dollar amount. Internally those in the mineral industry use the term, Royalty Acre, when discussing value and purchase offer amounts. The simple reason for this is that two acres in the same unit, one at a fifth royalty and one at a quarter royalty, do not have the same value. The acre with the quarter royalty is more valuable. Therefore an acre with a 22.5% royalty fraction that receives a $7500 per Net Mineral Acre offer is being valued at $4166.66 per Royalty Acre (RA). I'd say that the offer is "in the ball park" from a fair market value perspective but then again I don't know the specifics of your mineral acreage. I suspect that the company making the offer has some reason to expect new wells in the near future. Most offers come from companies that do not have "inside" information. They are merely looking at the information available in the public record and making an educated guess.
1 NMA @ one eighth royalty = 1 Royalty Acre. 1 NMA @ one fifth royalty = 1.6 RA. 1 NMA @ a nine fortieths (22.5%) royalty = 1.8 RA. 1 NMA @ one quarter royalty = 2 RA.
The offer was made to me just before I found out XTO was drilling their first Bossier well on the Keydets unit.
Then you have found the reason for the timing of the offer. Far too many mineral lessors are unaware of drilling plans. These buyers count on that.
Mine was from same peeps as Mr. Sunday. I will ask my brother or sister if they called them back. I knew about the bossier well but Only a few names are listed and they are not mine. Best I can tell is the surface location is only thing touching keydets. Otherwise it appears we do not profit from that. I do not really understand it all. I do understand a million bucks though! lol Anyway I will ask my brother etc... (the other well.... i thought it was boweevils, have to look again )
It doesn't matter where the well pad is located. It matters where the horizontal portion of the well is perforated. Operating companies often prefer to have drill sites just outside the unit boundary as it allows them to build the curve and reach their target depth before the lateral enters the unit boundary. Also it is common for well pads to have horizontal wells going both north and south.
My offer was also like Mr. Sunday's above $7,500.00.... acre etc It is also being offered by a company blackstone working with XTO/ keydets.... Whom I would assume do have inside information about what is to come!!! just sayin' :-)
Blackstone and XTO are joint venture partners. So yes, Blackstone has inside information.
So some mineral companies might be trying to get enough acreage to put a drilling program together then turn to Blackstone and XTO or some other drilling company to do the drilling. Is that why we are seeing some lease offers in areas that weren't leased during the initial boom? Thanks Skip.
Blackstone is a mineral company. They acquire mineral rights and then look to do a deal with an operating company that will drill and manage the wells. Blackstone was able to accumulate a lot of acreage in the southern reach of the Haynesville Fairway (E TX) because of large mineral holdings acquired from timber companies. Blackstone's original Haynesville JV was with Encana. When Encana left Blackstone started working with XTO. I suspect that Blackstone is looking to expand their acreage as there is interest from two E&P companies with deep pockets, XTO (ExxonMobil) and BP (British Petroleum). There are some areas of LA and E TX that were never developed for Haynesville/Bossier strictly owing to the financial distress of the original companies. New companies and new well designs are allowing operators to make a decent profit even at low NG prices. There will be some efforts to expand the proven area of the Haynesville Basin. In doing so, some land owners will see new or renewed interest in leasing.
What Chloe is talking about is an offer to purchase mineral rights, not a lease. Blackstone doesn't own all the minerals in certain units or areas where new units may be formed. Blackstone's focus is on owning the mineral rights. It will be XTO or BP or one or more land companies working for them that will be offering leases.
Thanks Skip. I know jffree1 is very familiar with the area in San Augustine that we own mineral interests in. Information y'all provide is very helpful.
Is (surface location) that then what the term "commingling" comes from.. or I am way off ?
From what I read things will be changing alot from how things were done in the past and how things will be done in the future.. meaning laws etc.. sure do not want to get caught up in a legal issue.. ... or the rug pulled over me !
Cummingling and downspacing are new terms... for me
A surface location is the pad where a well is drilled from and where the hydrocarbons being produced, gas or oil, are brought to the surface and connected to tanks or a pipeline. In the age of horizontal drilling many times the surface location is not even located in the producing unit. It is slightly outside the unit boundary.
Commingling refers to the mixing of hydrocarbons from two different formations or from separate units usually in a pipeline or treating facility. It can create a problem with allocating producing and royalty and requires the permission of the regulatory authority. Things have already changed especially since 2008 but may just be coming onto your radar.
Downspacing is a term for a company decreasing the distance between wellbores often requiring regulatory approval. A company may drill 4 wells in a drilling unit and then determine that those wells did not recover all the reserves possible. So they request to be able to drill more wells in the same formation.