Hi all,
I recently bought a property in Arlington (just a single family home sitting on perhaps 1/6th of an acre) and about a month ago got an offer letter from a landman. Lease terms are:
lease bonus of $6,500/net mineral acre
3 year - No surface use lease
25% royalty
I've not contacted him. Are these terms decent? I assume I can get more by not jumping on this first offer, but don't know what the "going rate" is. Also, this is my first time to the rodeo. I've read up a bit and know about some things I'd want to see in the lease but would not want to sign anything without a lawyer looking at it first. However, I'd like to get an idea of how much something like this can pay off in the first place. Specifically, given the tiny amount of land, is it going to cost me more to have a lawyer look over a lease than I'll gain in bonus payment and royalties? Any insights/advice would be greatly appreciated. Thanks!
Quote from a colleauge
"In this natural gas market, you be wise to take that offer. That's the 1st offer north of $3,500/ac that I've seen in the Barnett in over a year". Unqoute
This came from a group that has over 12,000 acres in the Barnett
It does sound like a very reasonable offer if the lease language checks out. Possibly companies are having to offer more because word has spread on how they are deducting so much even on supposedly cost free leases.
Uriah Heep, From the novel or the Rock Band?
LOL! From the Rock band.
Okay, so the offer sounds good. I guess all I'm wondering now is this. Is it worth it? It's all of 1/6th - 1/7th of an acre in suburbia. The bonus will be like $1000. Royalties?!?!? Who knows. Maybe nothing. I need to find out what a lawyer is going to charge me to look over and potentially modify a lease that XTO lawyers obviously did not craft with my best interests in mind. I'd guess the fee will not wipe out the entire bonus, but still.
Michael Hutchison said:
Uriah Heep, From the novel or the Rock Band?
Uriah, You didn't say the size of the proposed drilling unit, your royality will be proportionate to the total number of acres in the section. A good well in a 40 acre unit might make you some money but in a 640 acre unit probably wouldn't amount to much. $6500/acre is an impressive bonus, someone must consider it a good prospect. Check out some of the other forums on this site there are some landmen and other o&g professionals who could advise you about the lease terms.
I will second what Mr. Hutchinson said. I think your money would be better spent having one of the mineral managesrs from this site look your lease over, than a lawyer.
That is what is being offer in the Arlington, TX area. A few years ago, some of the leases were going for as much as $25,000 per acre, but that is long gone. The avg. well in Arlington is bringing about $200 per month per 1 acre when it's not shut in. Make sure your lease doesn't have a clause were you will pay for several things, like transportation, etc. I marked that out on our lease, so we get a lot more than some of our neighbors who have the same amount of land.
It may pay to go to an OIL & GAS attorney if this is your first go at this. Probably cost about $300 if you keep it short. Write down all your question in order to save time. Remember the longer you are in the office, the more it cost. Also, be sure it's an oil & gas attorney that deals with this everyday. May be more per hour, but a lot less hours as they don't have to research it.
Virginia
Thanks for the insights all. I've contacted a lawyer who charges by the task/work done instead of by the hour. So, I'll get a non-binding quote after providing her some info and decide what to do from there. This being the first time, I am inclined to use a lawyer.
Virginia Pflum said:
That is what is being offer in the Arlington, TX area. A few years ago, some of the leases were going for as much as $25,000 per acre, but that is long gone. The avg. well in Arlington is bringing about $200 per month per 1 acre when it's not shut in. Make sure your lease doesn't have a clause were you will pay for several things, like transportation, etc. I marked that out on our lease, so we get a lot more than some of our neighbors who have the same amount of land.
It may pay to go to an OIL & GAS attorney if this is your first go at this. Probably cost about $300 if you keep it short. Write down all your question in order to save time. Remember the longer you are in the office, the more it cost. Also, be sure it's an oil & gas attorney that deals with this everyday. May be more per hour, but a lot less hours as they don't have to research it.
Virginia
Like Michaeil said, I unit of 640 doesn't make a person much if they only own 1/6 of an acre. One of the problems with leases spacing in Arlington, none of the unit are the same size. Our unit spacing is on 309 acres and most of the people own 1/2 acre or so. A friend in another part of town is on 520 A. and most of the houses are on 1/3 or less acres, so she get a check about every 3 months.
Okay, so far the info I've gotten from y'all has been very useful and I'd like to tap into it again, if you'll pardon the pun.
I've spoken with the land man and gotten some info. The proposed well was drilled about a year and a half ago and is in Arlington on the corner of Eden and Matlock. Drilling is expected to begin in the spring of next year. I'm told 98% of the unit has been leased and they are trying to sew up the remaining 2% of which I am included having bought this house as a foreclosure recently. With the $6500 bonus I was offered and given my lot of 0.15 acres I'm looking at ~$960. The royalty is 25%. The drill unit will be 300-320 acres.
I've also heard from the first lawyer I contacted. This lawyer will conduct 'Market Analysis' to determine if the lease bonus and royalty match the 'going rate' for $450 and will do 'Lease Analysis and Preparation of Recommended Changes' for $500. That totally wipes away my entire bonus unless this lawyer can significantly increase it. The feedback I've gotten here is the bonus is quite good and a 25% royalty seems pretty standard. I may not use this lawyer at all, but at the very least I'd ask to just forgo any market analysis, save the $450, and just have the lawyer make sure the lease protects my interests.
Any thoughts/comments/advice would be appreciated. Thanks.
You might want to forget the lawyer all together. Unless the well is phenomenal the $960 is more money than you will likely see in a year. 320ac/.15ac=.0004687x.25=.0001171. I'm guessing it would take you 3 years or so to get your $960 back.
Uriah,
Get a good mineral manager to negotiate your lease. That $6500.00 could be for your lot rather than an acre. Also, no deducts are possible with the right mineral manager.
Yours,
Wes Luke
Uriah,
I would recommend that you hire Buddy Cotten, a mineral manager on this forum. He can negotiate the lease for you and make sure your interest is protected. I hired him to assist me with several things and have been very pleased.
Sounds like the lawyer is taking you to the cleaners. That is way to much. I use an oil & gas attorney and he hardly ever charges over $200 for everything.
Also, if 98% have already signed the lease and you don't, you will not get a bonus or any oil checks. If you decide later, it will cost you a lot more than it worth. I don't know what company is trying to lease your property, but I bet they want you to pay transportation cost, etc. Check the 2nd paragraph and anything that says you will pay, mark it out.
Also, if you are on Matlock and Eden Rd., you are probably looking at less than $100 per month once they get it on line. And with the small aceage, you may get a check once a year.
I live in NW Arlington on 1/2 Acre and get a check every couple months. So, you probably aren't going to be making much money, but your gas will be taking anyway and any monry will go to the state.
Yeah Virginia, I'm not using that lawyer. Total rip off. Per the suggestion of 6th generation Texan I'm in contact with Buddy Cotten. His rates are WAY more reasonable. As you say, the royalties will not be much. I'd be happy if a better bonus can be negotiated and just want somebody who knows enough about these leases to look over/amend it to ensure I don't end up losing rights and/or paying for a bunch of stuff (i.e. transportation costs) that I don't want to fay for. Incidentally, this the company wanting to lease is XTO.
Uriah,
XTO is a fairly good company and has drilled several wells in the area. Glad you have Buddy looking at the lease for you I think that is wise.