Bonus for requested expanded lease?

Oil and Gas Leasing Help
#1

My family and I have very small mineral interests in Howard/Borden County - we have a lease that has been in effect since 1944 and has never been updated - the lease has been held by very modest production.

The operator has written and requested that we amend the lease to provide for "pooling" in order for them to drill a horizontal well not covered by the 1944 lease Term.

I wrote back that if they are asking for an expanded contract term - they need to pay consideration for that - meaning some sort of bonus.

The (young) landman said "nobody else every asks this"...which I found surprising...yes potentially all parties to an amended lease COULD benefit if the new drill horizontal well "hits" - but it could also loose if not and we will have expanded lease terms for no gain.

Has anybody ever asked for additional consideration on one of these things?

#2

Don’t sign anything Laura. They are making a fit out of it because they want you to be bound by that old royalty

#3

There is always some horse trading going on, both between oil companies and between oil companies and mineral owners. Landman's job is to get you to sign and he does not care if he is truthful or not. You should consider asking for an increased royalty rate instead a bonus. If there are too many overrides, then you can ask for your royalties to be paid 'cost free' which will effectively increase the royalty rate. This language is tricky and will require a well-written agreement depending on the current language in your lease. Or better yet, get both.

#4

Thanks so much for quick response! Landman made me feel like I was being shamefully greedy!!

#5

Thanks so much - will take your advice and see what I get back!!!

#6

Oh no problem. I have been in the industry for years, so I know how things work.

I agree with TennisDaze below, royalty is way more important than a "Bonus". Since its an old lease, its most likely a 1/8 royalty. You need to get it changed. I sent you a friend request. I can send you some documents that may help so you know what to your trying to achieve during your future negotiations.

#7

I accepted!! Bless you!!!

#8

I have a minimum acreage pooling clause in my lease. They came to me for an exception on a small number of acres, and I told them what it would cost for me to sign it. I was told they never pay for an this type addendum. I said call me back if you change your mind. They called back and we agreed to a number.

Ask for the moon. If they need you, they will offer you a slice of cheese. From there, it's just a matter of how much effort you want to put into negotiating.

#9

I would be less concerned with the bonus and more concerned with other items. For example, I handle Ratification of Leases for pooling all the time. What is becoming customary for me is to have the lease modified so that there are no deduction charged to the mineral owner in the event of production.

Bonus is nice, but the real money is in the ground. That means royalty. So to improve your situation is to increase the royalty, which they will not likely do or have deductions removed, which I have never had fail for them to accept. I suppose that it will happen one day, but not yet so far. To not have deducts taken is like an increase in royalty, but better. Some deductions after a couple of years will sometimes go over 70% of the gross. Just horrible.

You already that your mineral interests were small. There is a large risk that they do not actually need you to do anything and they would have the right to pool the other mineral interests - with you not being pooled. If it were a horizontal well and they crossed your property, you would get your share of production as to the portion of land which they crossed. However, you would not participate on other wells in the pool where well bores were drilled and were not located on your property.

Best,

Buddy Cotten

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