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Hello,

My family has been approached by an Oil & Gas company with a lease. The family owns mineral rights in Monroe County, Ohio. I told them not to sign until we took a closer look. There are 3 mineral owners, and 2 of them already signed the lease. The last owner is holding out until we have all the facts together. The company offered 1k per acre as a sign on bonus. Which seems much lower than what people are getting in the area. I have heard of to 5-10k bonuses. As for the royalties they offered 15% which is 5-10% lower than what I have heard lately. Both bonuses, and royalties seem to be on the rise in the area. Also the wording in the contract seems to state that the royalties are paid after expenses, which I am assuming would reduce them nothing. There are about 5 oil wells within a 5000ft radius around the property, 2 are active/producing I believe the other 3 are drilled, or being drilled. I assumed all or some of these wells were owned by the company that presented the lease to the family, but according to the ODNR website there are 3 different companies, non of which are the company that approached them. I have a theory that said oil company is attempting to buy up mineral rights surrounding the other companies wells in order to block them from horizontal drilling around their wells. Is this a common practice for competing oil & gas companies? I can't think of any other reason they would lease mineral rights in an area where they do not have a well. Unless they are going to buy them out, or drill a new well? Sorry I realize this is a lot of information. I guess my main question is the holdout signer obligated to work with the company that the other owners signed with, who may have no intention of drilling on or under the land? Or can we contact the other well owners in the area and negotiate a lease with them? Also kind of off topic but the land is about 3 miles from a branch of the ET Rover pipeline, I am assuming this may help with value?

Any advice would be greatly appreciated.

Thank you,

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Get a lawyer or a landman on your side and hold out for the best terms.  I'm being lazy, Bradshawphot1.  You can just keep holding out = never lease for less than 1/4 royalty.  Get the most $ you can.  Good luck.

BG

I don't know if Ohio is a forced pooling state but you better know before you go any further.  The knowledge is paramount to what you are trying to do in making the best deal for yourself. 

Past that, spend 80% of your time determining the terms of the lease and especially the measurement and payment of royalty.  That is where 80+% of the money will come from.  Tactically, the term of the lease is important as well as the release of non-producing formations.  You may not have control of who the operator may be but know that your lease is most valuable to the operator that will permit and drill on your land.  In a developing field, bonus is of the least importance in the long run.  If reserves are known to exist under your land , establish production before you consider selling.  Eliminate uncertainty. Find a local petroleum geologist.  Geology is where all of these ideals for drilling start.

Gary L Hutchinson

Minerals Management 

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