Expert: Frederick M. - 10/29/2009

Question
I received a lease offer for an mineral interest in Lincoln County, Oklahoma underlying the NW/4 of Section 20-12N-02E. The offer is for 3/16 royalty on a 3 year lease with a $100 per acre bonus. Is this a fair bonus offer? Is the current production in this area?

Answer
Joan, if the lease is for shallow depths only (get a depth clause in your lease) then the bonus is probably about the going rate for the area. Most of the recent permits in this area are about a mile deep (not that deep) and the pooling bonus amounts for similar leases have been for $100 or less recently. BNW, Inc. and United Land Co, LLC are the only two lessees I see in your immediate area. It's quite possible that United was hired by BNW to get leases for them so there may in effect be only ONE company leasing in your immediate area currently. No competition for leases is not good.

There is some current production to the west of your minerals by a mile or two, and one decent gas well in Section 19, directly west of you. The "JB 1-19" is producing about 15,000 MCF of gas per month currently and a few truckloads or so of oil as well. It started producing in April of 2008 and has not declined much at all since then. Kind of unusual, but nice for the royalty owner and seems to be typical of other wells in this area that were drilled last year.

You can check these production figures yourself by going to the Oklahoma Corporation Commission oil and gas database page http://www.occ.state.ok.us/Orawebapps/OCCOraWebApps.html


Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
Timbercreek Mineral Company, LLC