PatO Homes - the Right Move!

Info on Barnet Shale

To: Coppell, Flower Mound and Valley Ranch Offices

From: Mark Wolfe

RE: Mineral Rights & Barnett Shale

 

I found this information extremely practical and in simple English for all to understand.  It was sent to a Coppell agent from a family member that is an oil geologist.

---

The formation is named Barnett Shale, it's a black shale with a large amount of organic material, the decay over eons of time has generated the natural gas. With the increasing price of oil and natural gas, the amounts of gas reserves under the metroplex area are now economic to drill for.

 

There are a number of ideas or issues here. The Texas Railroad Commission regulates all oil and gas drilling premits. Each well drilled has an area of 40 or 80 or 160 or 320 acres per well. So there would be a 'landman' from a 'gas company' canvassing the greater Coppell and each property owner for the right to drill one well for each 160 arces or so, depending on how the Texas RR Commission deems the drainage area per well.

 

This 'landman' has already been to the county courthouse and knows how the property ownership is divided up, he also knows which property owners have the minerals rights and which properties are surface rights only. A lot of areas have been seperated vertically between surface rights(home owners) and mineral rights(subsurface). Remember these companies need 40 -320 acres of mineral rights for each well location. Surface owners are also compensated but at a lesser amount as compared to the mineral owners. The usual amount of money for an acre of mineral rights would be somewhere from 500-1000's per acre, depending on what they have paid in the past that would suggest what they would spend now. There are regulations in place, if someone doesn't want to lease their land, the company can make application to the Texas RR Commission to 'pool' unleased properties within the drainage area (40-320), that allows them to continue drilling their wells. the unleased property is given the customery payment, regardless of objection by the land owner. Based on 1200/home, that could be a lot of money just for the mineral rights/well.

 

Another point about leasing mineral rights vs surface rights. Mineral rights will receive an upfront dollar figure plus an amount depending on the amount of oil or gas extracted from a well. This additional amount is set by a term called roylaties(historically it's been 1/8 or 12.5 percent) but it can be as high as 1/4 depending on how or what was the agreed amount with the majority of mineral owners around the owner's property. Now sufrace rights, these people receive a one time only payment and that amount can be negotiated, especially if the property is near the well, remember this rig will be in the area for 60-90 days, operating 24/7 and it can be loud, there will be repairs on a well from time to time, these repairs could involve another rig, somewhat smaller but still disruptively loud for some days.

  

Revenue from a gas well, these wells will produce 1000-5000 mcf/day, I believe the current price for natural gas is in the neighborhood of 10$/mcf, 10$ x 1000 mcf/day = 10,000 $/day gross income. At 1/8 royalty, 12.5% x 10,000 = 1250/day per well, if your share of royalty is 0.5 acre, that's 0.5acre/320 acres x 1250 $/day = $2/day approx.

 

Lastly, these wells will have very good production/revenue when they start producing and over time the production will decline until the cost to produce the well becomes greater than the revenue generated thru produced volumes, the well becomes 'dead'.

 

To Buy or not to Buy....there is noooo question!!!

I've been saying this all year. I know some areas of the country are hurting and prices are declining. Not here..Now is the time to buy in TEXAS!!! Especially Dallas Fort Worth..Here are the thoughts of a local lender I received today.

When major markets have 30% declines and this area (Dallas Fort Worth) is basically flat  - you should be a buyer.  Think about it. If we hold our own in price during the worst pullback in home values in memory, our values are going to start going up when the pullback ceases.  Buyers in this area are going to have a much improved equity position in two years.  And beyond that it gets even better. We didn’t have double digit gains and we’re not going to have these monster losses. I know we’re all watching the same stuff, but when Lou Dobbs says wait 18 months to buy, he is stereotyping every market into one giant Vegas.  Watch something else.

 

I can't agree more. If you have anyone moving to this area let me know. Now Is a great time to buy!!