Investing for the "TIMES"
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Oklahoma STACK Play
The majority of the play is located across Kingfisher, Blaine, Major, Garfield and Canadian counties.
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I have been searching for just the right type of investment for our partners and for "our times." I have long been interested in and attracted to Mineral Rights ownership. It is actually a real estate transaction in an oil and gas environment. There are some HUGE benefits to owning minerals, but it is not a drilling or development deal. It can truly be a legacy asset if the owner so desires.
Private investors are generally not as well informed as to what owning minerals can mean, how it can be done and how investors make money. I want to begin to lay out some of the important aspects of a mineral rights transaction. I have been looking at a possibility or two. The one that's caught my interest is in the Anadarko Basin, it's called the STACK. The name "STACK" is derived from Sooner Trend (oil field), Anadarko (Basin), Canadian and Kingfisher (counties). |
Timing is Everything |
The timing is perfect for mineral acquisition as many mineral owners'/sellers' price related expectations generally declined in proportion to the price of oil. This can translate into the ability to acquire acreage at very competitive prices. Unlike many "hot" plays in the US, mineral ownership in the STACK is highly fragmented and many times involve first time sellers which can translate into smaller packages and can often be acquired at lower prices.
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Legacy Asset |
Mineral rights ownership , as an asset category, is a lesser known form of an investment vehicle more commonplace in an institutional type offering. As drilling and production occur, mineral rights can provide the owner with the opportunity to receive handsome lump-sum, upfront bonus premiums to lease plus royalty payments, ranging anywhere from 12.5% - 25% of the gross revenues from producing properties. In other words, if you have a 25% royalty interest and the property produces $100,000 per month in revenue; your monthly check will be $25,000... Right off the top.
This lucrative, passive form of income, combined with the fact that mineral owners bear no development risk, no drilling, completion or dry-hole liability and incur only nominal costs to carry, make it a very attractive opportunity. Long sought after, mineral right ownership is one of the truest forms of legacy assets. The mineral rights never expire. Oil companies lease the rights from the mineral owner and pay lucrative bonuses to have the right to drill. When they find oil, the mineral owner will receive royalty checks until the lease is no longer commercially profitable. If the oil company never drills or if their leases expire, the whole lease bonus, royalty payment process can repeat itself. There are areas where oil and gas development has occurred and primary zones have been depleted by drilling activity. Nowadays, its very likely newly discovered primary and secondary technologies can bring the fields back into production. This allows the mineral owner to repeat the lease bonus and royalty revenue income scenario. These revenue streams can go on for generations. |
Outlook |
The STACK play, now in its infancy is being compared to the early days of the Bakken Shale in North Dakota. Large Independent oil companies, like Devon, Chesapeake, Continental Resources and Newfield have large acreage positions in the play and 500 "+" barrel of oil equivalent per day wells. In an ideally structured mineral acquisition program, mineral acreage would be bought "in front of the bit" and revenues paid to the mineral owner could begin in a very near term.
Mineral rights acquisitions are very interesting prospects to consider. As time goes forward, I will be posting more on this and other money-making topics. |