OG-13-00307, OG-13-00308

McKenzie County, ND
North Dakota Oil and Gas Lease Sale

SOLD

Property Schedule

Due Diligence Began 2/26/2013
Bidding Started 3/14/2013
Bidding Ended 3/21/2013 3:00 PM
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OG-13-00307, OG-13-00308
174.07
174.07
Auction has ended
3/14/2013 3:00 PM CDT
3/21/2013 3:00 PM CDT
-
$2,760/acre
$50/acre
$10
$490,225.93
(Bonus + Agency Fees + Advanced Rental + 2% Buyer Premium)
Tract Details
Lease No.
OG-13-00307, OG-13-00308
County, State
McKenzie, ND
Gross Acres
174.07
Net Acres
174.07
Royalty Rate
3/16
Lease Term
1 Years (Paid Up)
Rental/Acre (Per Year)
$1.00
Rental Due At Closing
$174.07
ND Administrative Fee
$10.00
Buyer Premium
2.00%
Additional Information

Notice: The State of North Dakota is leasing 174.07 net mineral acres. The acreage is included in a 563.55 acre spacing unit consisting of Sections 30 and 31 of T150N-R104W. The lease offered will be 3/16ths royalty rate. Whiting Oil and Gas Corporation has submitted an AFE to drill and complete the Kuykendall 34-31-1H single lateral cross spacing unit horizontal well to test the middle Bakken formation. Successful bidder will have option to participate in a proposed AFE or decline to join the AFE and be subject to the risk penalty described below. The risk penalty will not apply if the successful bidder joins the AFE. Please check the following link to view the AFE.

AFE: Kuykendall 34-31-1H

Operator Statement Regarding AFE: The winning bidder will have 30 days from the date the auction ends to make their election.

BIDDER ADVISORY: Please review the mock lease documents below, as they will reflect the form of the actual lease will be issued, including a 3/16th Royalty.

Update: Mock Lease Forms Added

Whiting Petroleum holds 1,100,000 gross acres and 700,000 net acres in the Bakken/Three Forks hydrocarbon system in the Williston Basin.

Area Map - Lease Area, Kuykendall Site and Other Offset Well Locations

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Kuykendall 34-31-1H Drilling and Completion Proposal

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DrillingInfo Production Report for Evy June 18-19H (22171)

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Langwald 31-17-1H (24558) Permit Application and Permit Details

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Finsaas 31-16-2H (24730) Permit Application and Permit Details

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Miller 34-8-1H (24128) Permit Application and Permit Details

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"In the Bakken formation, the hydrocarbon-rich, but relatively impermeable upper and lower shales are widely believed to be the source rocks generating the oil that moved to the somewhat more permeable middle shale layer."
Excerpt from IPAA Article, The Mighty Bakken

Well Information:
Kuykendall 34-31-1H
Sections 30 & 31: T150N R104W
McKenzie County, ND
Location: Surface location is in the SWSW of Section 32-T150N-R104W with bottom of hole estimated to be 240' FNL, 660' FWL of Section 30-T150N-R104W

Operated by Whiting Oil and Gas Corporation
NDIC Order Number: 18167
Formation: Middle Bakken
Field Name: Hay Creek
Spud Estimated March 31st, 2013

Lease Term5 years
Royalty Rate3/16
Rental Rate.00/acre/year
Rental Due at Closing1 year
Gross Acres174.07
Net Acres174.07
N.D. Admin Fee.00
Buyer Premium2% of bonus bid

North Dakota Statement Regarding River Boundaries

Under federal law, the state owns the beds of all navigable rivers and lakes, such as the Yellowstone and Missouri Rivers and Lake Metigoshe. The lease being offered is for the minerals between the ordinary high watermarks of the Yellowstone River.

The sovereignty of the minerals beneath the channel of the Rivers is not in dispute, but the State of North Dakota is currently involved in active litigation regarding the ownership of the shorezones, or that portion of land generally described as the area between the water's edge and the ordinary high water mark of navigable waterways.

Those cases being:

  • Brigham Oil & Gas, LP v. ND Board of University and School Lands, et. al.; Williams County File No. 53-2011-CV-00495
  • Stanford A. Reep, et. al. v. State of North Dakota, et. al.; Williams County File No. 53-2012-CV-00213
  • William S. Wilkinson, et. al. v. Board of University and School Lands of the State of ND, et. al.; Williams County File No. 53-2012-CV-00038

On January 28, 2013, in the consolidated cases of Brigham Oil & Gas v. Land Board and Reep v. State, the Williams County District Court granted the State's motion for partial summary judgment on title to shorezone minerals. However, if appellate courts reach a different conclusion, the bonuses received on acreages will be refunded accordingly.

Information regarding the rules and leasing of state minerals can be found on the website of the Minerals Division of the Department of Trust Lands: http://www.land.nd.gov/minerals/oilandgasleasing.aspx.

North Dakota Drilling Non-Consent Provisions

Persons interested in bidding on Leases OG-13-00307 and OG-13-00308 should become familiar with "risk penalty" provisions found in Section 38-08-08 of the North Dakota Century Code (NDCC) and Section 43-02-03-16.3 of the North Dakota Administrative Code (NDAC).

Provided certain conditions are satisfied, NDCC 38-08-08 allows the owner to impose a penalty on other interests in the well's spacing unit if those other interests decline to join in the risks and costs of drilling.

The North Dakota Industrial Commission oversees application of the risk penalty law and has adopted a rule to implement it. The rule is found in Section 43-02-03-16.3 of the NDAC.

NDCC 38-08-08 states that if the nonparticipating owner's interest is not subject to a lease, the risk penalty is 50%, and that if the nonparticipating owner's interest is derived from a lease, the risk penalty is 200%. These risk penalty percentages are applied to the nonparticipating owner's share of the reasonable actual costs of drilling and completing the well, and may be recovered only out of production from the pooled spacing unit.

In order to enforce a risk penalty, the owner, must make an unsuccessful, good faith attempt to have the unleased owner execute a lease - or - must make an unsuccessful, good faith attempt to have the leased owner join in and participate in the risk and cost of drilling. "Good faith attempt" is more fully described in NDAC 43-02-03-16.3.

As it pertains to Leases OG-13-00307 and OG-13-00308, the Commissioner of University & School Lands, cannot warrant which risk penalty will be assessed for non-participation.

The procedures and process outlined in NDCC 38-08-08 and NDAC 43-02-03-16.3 should be referenced and followed. Risk penalty disputes are decided by the North Dakota Industrial Commission. A dispute whether a risk penalty attaches to Leases OG-13-00307 and OG-13-00308 and their interests, and if so the amount of the risk penalty, would be addressed at a hearing held by the Industrial Commission.

Important Notices Pertaining to North Dakota Department of Trust Land Lease Auctions

  1. The tracts available for lease are sold on an as is basis, with no representations or warranties regarding the quality of title, ownership, or the accuracy and completeness of the information provided by the State;
  2. The tracts available for lease are subject to the restrictions found in North Dakota Century Code (NDCC) Chapter 15-05, Leasing Coal, Oil, Gas, and Other Rights (www.legis.nd.gov/cencode/t15c05.pdf) and Administrative Rule Chapter 85-06-09 (www.land.nd.gov). Sample lease forms are available at www.land.nd.gov.
  3. The burden of due diligence is the bidder's responsibility prior to any auction;
  4. The lease execution date of all State leases is the effective date of auction as designated in the transactional documents; and
  5. The successful bidder must make payment by wire transfer or automated clearing house (ACH) for all bonus, rental, and bidder's premium owed to the State within 7 days. The State will accept payment from only one bidder per tract; however, a bidder may make multiple payments in one wire or ACH, provided the bidder indicates which tracts are involved in the payment.
Notice: A 2% Buyer Premium, calculated as 2% of the total bonus bid amount, will be added to the cost of this lease.
Contact Information
North Dakota
Drew A. Combs
Director of Minerals Management
1707 N. 9th St. - PO Box 5523
Bismarck, ND 58501
(701) 328-2800
EnergyNet
John S. Munroe
VP of Engineering / Government Lease Sales
440 Louisiana, Suite 600
Houston, TX 77002
(832) 403-3122
Bid History (Top 10)

Bidder

Placed

Amount

Bidder #8

3/18/2013 3:49:21 PM

$2,760

Bidder #5

3/21/2013 11:25:05 AM

$2,750

Bidder #8

3/18/2013 3:49:21 PM

$2,510

Bidder #5

3/21/2013 9:57:17 AM

$2,500

Bidder #8

3/18/2013 3:49:21 PM

$2,010

Bidder #5

3/20/2013 11:20:31 AM

$2,000

Bidder #8

3/18/2013 3:49:21 PM

$1,760

Bidder #5

3/20/2013 10:46:31 AM

$1,750

Bidder #8

3/18/2013 3:49:21 PM

$1,510

Bidder #5

3/19/2013 1:15:09 PM

$1,500

View 20 earlier bids...

1