Hi. I am a mineral owner in Mountrail County T158N R94W with no well and no permit has been pulled. My current lease is with Diamond Resources & expires early spring of 2012. If it looks to expire, should I contact several companies to add some competition in the process of seeking another lease? I might contact Contex Energy, Hunt Oil, Empire Oil…? Any ideas or tips as I move closer to a new lease?
Garren:
Your current lease is probably not with Diamond Resources as I believe they are a lease broker. You probably leased to them originally but most likely, they sold your lease to an oil company. If this lease expires in early 2012, you are entering the window where top leasing might occur. Your on the right track in that you should be doing your homework on finding a new lease with another company but I would contact some of the oil companies directly and avoid the lease brokers. Find out what companies hold the leases in and around your acreage and contact them after you decide what the current bonus/acre and % royalty is in your area. You are definately in a "hot" area and you should have no problem getting a great lease with a very good operator.
Charles,
Can you think of one production company that he can deal with directly? Both Chesapeake Energy and Devon are using brokers here. I only ask this question due to my own curiosity.
Jon:
I don't know of any particular production company that deals directly with the mineral owner. One might want to make a list of current operators in the area and contact their land departments in order to find out if they will deal directly. Unfortunately, most production companies that I know of utilizes the services of lease brokers. I guess they consider this a more cost effective way to secure mineral leases. It never hurts to try as it might be very beneficial, money wise, to go this route.
Jon A. Baker said:
Charles,
Can you think of one production company that he can deal with directly? Both Chesapeake Energy and Devon are using brokers here. I only ask this question due to my own curiosity.
Mr. Hartman,
You have the right idea but I would not "stir the pot" just yet. You should not encourage them to drill when a new lease opportunity is this close. By all means start doing your homework now. Determine what terms you would want in a new lease. Identify and make a list of those companies permiting/drilling within a 12 mile radius of your property. Come up with six to twelve names if you can. The more competing bids the better.
Then determine which one of those companies holds the lease Diamond took (undoubtedly they assigned it to one of the exploration companies). You want to know which one currently holds that lease. Then as Mr. Mallory noted, be prepared for them (or Diamond) to approach you with a top lease or renewal. Find out what they're offering but don't commit too early. You'll want competing bids in hand to compare, and to use to drive up the offer given.
If your lease expires "early 2012" you may have a great opportunity to improve your terms. With a new lease; 1. Your existing royalty rate could be improved to 20%. 2. The bonus rate on a new lease will be five to ten fold higher than you received in 2009 or 2007. Those bonus rates will only go higher as more wells are drilled nearby. So in short, it may be best to consider a top lease, yet probably not. I would not rush as time is on your side. Get prepared now but hold off with any contacts until you're closer to the expiration date. Good Luck.
Great input, thanks! I will probably wait until maybe 2 months prior to my lease expiration before making some phone calls.
Regarding contacting oil companies verses brokers, I am familiar with looking at the daily permit lists. I can see who's pulling permits around us such as Hess or Continental Resources or Marathon and attempt to make a contact with them.
Also, I observed that I should focus mainly on royalties, short term and pugh clauses vs. the bonus amount. I don't understand horizontal pugh and vertical pugh clauses...? Other terms I don't understand are: 60- Day Continuous Drilling Clause, Max 2 year Shut-in Clause with a $10 shut-in
rate per acre, Indemnity Clause...?
Any help is appreciated.
-Garren
Garren:
You might want to click on "Mineral Help" at the top of the page as there are answers to various queestions in regards to leasing. Also, there is a blank space at the top also where you can google in" pugh clauses" and then view posts which have dealt with this subject. Take your time and research all aspects of this game. Also, you are correct in that the bonus amount in my opinion takes the backseat to a very good % royalty and short term lease (no more than 3 yrs.). Good luck!!
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Garren Hartman said:
Great input, thanks! I will probably wait until maybe 2 months prior to my lease expiration before making some phone calls.
Regarding contacting oil companies verses brokers, I am familiar with looking at the daily permit lists. I can see who's pulling permits around us such as Hess or Continental Resources or Marathon and attempt to make a contact with them.
Also, I observed that I should focus mainly on royalties, short term and pugh clauses vs. the bonus amount. I don't understand horizontal pugh and vertical pugh clauses...? Other terms I don't understand are: 60- Day Continuous Drilling Clause, Max 2 year Shut-in Clause with a $10 shut-in
rate per acre, Indemnity Clause...?
Any help is appreciated.
-Garren
One more item… my minerals are in 3 different parcels and fall into 2 different 1280ac spacing pools. Would it be beneficial to lease the parcels separately or all lumped together?