Oil and Gas Leases in Colorado and Wyoming

Acquiring Oil and Gas Production Rights

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Thank you for your inquiry. Our unique service allows our clients to take advantage of relatively little-known programs operated by the Federal and Western State governments which allow individuals to compete for and possess oil and gas production rights on public land on the same basis as multinational corporations. We offer a "turnkey" approach to help you claim your share of these rights. We research oil and gas lease parcels offered in periodic State and Federal auctions in Wyoming and Colorado, go to bat for you as your proxy on the auction floor, and, should you wish, assist you every step of the way from issuance of your lease to getting it sold and assigned to an operator for development. The lease will either be purchased in your name, or will be assigned to you immediately upon issuance by the government agency.

Once you have acquired a lease, you can hire us to act as consultant to seek an operator to develop the lease, or you can do so yourself or through another administrator. We cannot guarantee you that we will be able to interest an operator in developing your lease. Further, even if an operator does develop the lease, we cannot guarantee you that oil will be discovered on your lease or that the oil discovered will be in sufficient quantities to justify developing the well. If, however, you are successful in obtaining an operator who finds oil in sufficient quantities to justify developing a well on your lease, the following is an estimate of the royalties which could be payable from the lease.

Royalties and How They Work For You

Let's assume a conservative figure of $80/barrel. After 2008's wild ride, predicting oil prices is hazardous at best. We'll stick with the current price range for now. Let's also assume a conservative production of 40/barrels/day on a vertically drilled lease. (Often, valuable gas is produced along with - or instead of - the oil, but we'll ignore the gas to keep it simple; just remember that associated gas production will increase these revenue figures.) A 4% overriding royalty interest is assumed. 40 barrels/day x $80 = $3200/day gross. overriding royalty interest essentially means "off the top", but a few minor taxes do get deducted, so we'll assume a net bases of $3100 to calculate your royalty. $3100 x 4% overriding royalty interest = $124 royalty per day. $124 x 7 days/week = $868/week x 48 = $41,664/year. 48 weeks/year production is assumed to allow a month's downtime during the year for repairs, maintenance, etc. To estimate your returns from higher - or lower - production, simply multiply the above figures by the corresponding factor. For instance, for 80 barrels/ day, increase all figures by 2, giving a yearly income of $83,328. The above figures are for one producing well on your lease. More than one well will, of course, increase your royalties in direct proportion; for instance, two wells @ 80 bbl/day = 2 x $83,328 = $166,656/year - and so on.

With the huge recent advances in horizontal drilling and hydrofracturing, the profit potential increases dramatically. Assuming production of 200 barrels/day on a horizontally drilled lease: 200 barrels x $80 = $16,000/day gross, minus $480 for minor taxes deducted = $15,520 x 4% royalty = $620/day, $4,340/week, and $208,320/year.

Remember that this royalty income is in addition to the cash bonus per acre you will receive if your lease is purchased by an oil company. An average figure of at least $100/acre is reasonable, which we expect to increase as the competition for good leases intensifies.

The R.C. Michael Company combines many years of academic, industry and government experience in the Rocky Mountain oil patch at your service. Currently, approximately 2 out of every 3 client leases which have been drilled have yielded royalty income. It's a 3-step process: 1) We research, evaluate, bid for and purchase leases on your behalf at government auctions. 2) Once your lease is acquired, you have three options; you may contract with us to act as consultant on maintaining and marketing the lease; alternatively, you may have a third party administer the lease or you may take on the full responsibility yourself of maintaining and marketing the lease. The goal is the sale of your lease to an oil & gas operator, for which you receive a cash bonus per acre. 3) The final step is the drilling of the lease, hopefully resulting in production yielding you long-term royalty income.

In March of 2010, we negotiated two Federal lease sales in the Denver Basin of northeast Colorado, both for $150/acre, on our clients' behalf to two Denver independents - one lease to Infinity Oil & Gas and one to Exterra Petroleum. This is the highest per-acre bonus we have yet secured for our clients. We expect the price per acre, and the assignment bonus paid for, good leases to only increase because of several factors, including:

1. slow but sustained global and domestic economic recovery;
2. continuing improvements in drilling and completion technology, making potential pay zones out of formerly overlooked formations (witness the huge Bakken play in the Williston Basin of North Dakota, the Marcellus Shale tight gas play in the Appalachians and the northern Denver Basin Niobrara play in our own back yard);
3. the chronic political instability of many of the world's oil-producing countries and regions - not only the Middle East but also, for example, Nigeria, Venezuela, and even Mexico;
4. Notably diminished offerings of new Federal onshore leases for sale by the current Administration and its "green" bias - the old inexorable law of supply and demand.

Just in the past couple of years, a synergistic technological revolution in horizontal drilling and well completion has opened up vast new domestic oil and gas reserves in formations that were long known to contain plenty of hydrocarbons - but were not commercially producible because their oil and gas were locked tight in impermeable rock such as shale. With improvements in horizontal drilling, we can "chase" a bed a long way horizontally instead of just penetrating its vertical thickness. And, improvements in artificial fracturing or "fracking" have created artificial permeability in formerly tight shales, making for red-hot technology-driven plays in such areas as the Eagle Ford shale in Texas, the Marcellus shale in the Appalachian Basin, and the Niobrara shaly limestone in our own back yard in N. E. Colorado and S. E. Wyoming. As the standard well spacing for horizontals is 640 acres, this puts a premium on larger leases of 640 acres and up.

Please examine, complete, and sign the top sheet of the enclosed Lease Purchase Agreement which spells out our mutual responsibilities to each other in this endeavor. When you return it along with your check, you will be taking your first step in claiming your share of America's energy future and joining our roster of clients currently receiving production royalties. I look forward to going to work for you.

Sincerely,
Robert C Michael