We have 134 acs. SE of Sulphur Springs. I have been approached by someone from Sam Houston Petroleum Land Services for MB Exploration East Texas about an 18 month seismic permit and two 3 year lease options. The seismic permit is $25/acre and the lease is for $75/acre. I've read some on here and am still confused. The SeismicPermit and Option To Lease is 5 pages long. I was wondering if anyone knew of any activity in the area and what to look out for if we did lease the property. Can we still access the land? I've read about companies tieing up land and never doing anything with it. Any help would be appreciated.
Carl, is that net mineral acres? Or a certain number of undivided acres under a tract of land? It can make a big difference. If I only had 10 net acres, I wouldn't have to think, I'd just tell them to stay off my land as the bonus and damages for seismic wouldn't even pay my lawyers fee to look it over. Options for the lessee are pretty much never in the mineral owners favor, if your minerals are discovered to be valuable through the seismic, they will probably jump on it for the price negotiated before you knew they really wanted them, no bargaining, because it's a 3+3 option, no bargaining unless they can't get a well drilled in 6 years. It's heads I win, tales you lose and you get tails.
Tell them seismic only with no option, if they come back after seismic, you know they want it and it's time to negotiate up from that $75 per acre.
You want to hear something even sneakier?
You need to get paid for the seismic up front. Even then they are getting an 18 month option on your minerals for $25 per acre. Likely they will try to not pay until the shoot is done and that way they have tied up your minerals for 18 months for nothing $0.00 swab-0, nothing, as the shoot may never come off.
They may be able to assign your lease option to someone else at a profit in that 18 months with never more than postage and pocket change of their own money in the deal or at risk. Many in oil and gas make money from other peoples assets, it's perfectly legal, but what would you think of it 19 months from now when you have received nothing?
They may be on the up and up, just offering a bad option deal and offer you a check for the seismic damages up front, but if they refuse to pay the seismic damages at the time of exchange of the agreement, I would tell them to take a hike. It's not against the law to owe someone money, once they have your executed agreement, they need not pay you unless you are ready to make some legal effort and pay some money out of your own pocket and go through the aggravation.
As Buddy Cotten taught me, the seismic shoot itself needs to be a moving consideration in the agreement, with liquidated damages if it is not performed.
Like in boxing, protect yourself at all times.
As far as I know we have the mineral rights for all 134 acres. Thanks, I learned a lot from your response. Like I said I'm a newby at this.
Geophysical Prospecting including seismic is scientific research. Don't give up control of an asset in the interest of scientific research. Leasing is giving up control of an asset against a promise, and only a promise, to maybe pay a production royalty someday. A mineral owner should never combine permission to allow scientific research with loss of control of an asset. The mineral owner can not win by doing so. As a "newly" do as Kennedy suggests, protect your self at all times and use any means available to you to do so. It is better light a candle by contacting Buddy Cotten than to curse the darkness.
Dear Mr. Baxley,
Items to consider are:
Damages in event no seismic is shot.
Minimum required selection.
No shoot, no option or required selection.
The list goes on and on. Since you have over 80 acres (gross and net), you are in a position to want to be evaluated and they want to evaluate. Under 80 acres, it is easy to undershoot property.
Some less than scrupulous companies will offer a seismic option to camouflage a lease option that ties up your property for a very long time with very little compensation. $25 per acre is in the ballpark. $75 per acre is not. IF they shoot seismic and want to acquire a lease, they are buying a lease on post 3-D evaluation for very little money.
Another option is to grant them a non-exclusive seismic permit with no option.
Best
Buddy Cotten
Carl, the simple economics of the matter draw my attention. 18 months is not an option, it's a short lease. 18 months is half of the three year lease term they are saying might be in the works. Would you lease your minerals for a 3 year term for $50 an acre? I doubt it. Why then would you option them for a year and a half for $25.
The agent and lessee are not your brother in law, you have no duty to make sure they make a killing.
18 months added to 3 years would be a 4.5 year lease at $100 per acre, $25 option and $75 lease, if you can't negotiate a better deal, I think I would pass. As my brother says, if it's worth anything at all, it's worth more than that.
Great answer. IMO, options are out the window before they start talking anyway unless there is a lot of $$$'s on the table and upfront! Sounds like these guys are on a fishing expedition without much bait.
r w kennedy said:
Carl, is that net mineral acres? Or a certain number of undivided acres under a tract of land? It can make a big difference. If I only had 10 net acres, I wouldn't have to think, I'd just tell them to stay off my land as the bonus and damages for seismic wouldn't even pay my lawyers fee to look it over. Options for the lessee are pretty much never in the mineral owners favor, if your minerals are discovered to be valuable through the seismic, they will probably jump on it for the price negotiated before you knew they really wanted them, no bargaining, because it's a 3+3 option, no bargaining unless they can't get a well drilled in 6 years. It's heads I win, tales you lose and you get tails.
Tell them seismic only with no option, if they come back after seismic, you know they want it and it's time to negotiate up from that $75 per acre.
You want to hear something even sneakier?
You need to get paid for the seismic up front. Even then they are getting an 18 month option on your minerals for $25 per acre. Likely they will try to not pay until the shoot is done and that way they have tied up your minerals for 18 months for nothing $0.00 swab-0, nothing, as the shoot may never come off.
They may be able to assign your lease option to someone else at a profit in that 18 months with never more than postage and pocket change of their own money in the deal or at risk. Many in oil and gas make money from other peoples assets, it's perfectly legal, but what would you think of it 19 months from now when you have received nothing?
They may be on the up and up, just offering a bad option deal and offer you a check for the seismic damages up front, but if they refuse to pay the seismic damages at the time of exchange of the agreement, I would tell them to take a hike. It's not against the law to owe someone money, once they have your executed agreement, they need not pay you unless you are ready to make some legal effort and pay some money out of your own pocket and go through the aggravation.
As Buddy Cotten taught me, the seismic shoot itself needs to be a moving consideration in the agreement, with liquidated damages if it is not performed.
Like in boxing, protect yourself at all times.
That is what it is sounding like to me. That or possibly combing the tax rolls for ladies that own property thinking they can take advantage of them. The property is actually in my mothers name.