Clayton Williams is now offering us $400.00 Bonus for 3 years. This is actually an an extension offer from another lease offer ready to expire in August. This looks like a really low ball offer to us. I'm wondering if any of you know what bonus's are being paid out in this area. I might just need to sit back for a while Any input would be greatly appreciated.
There are leasing agents currently offering $800 for 3 years, plus $800 for 2 additional years. Since there is very little drilling going on and this allows an operator to hold a lease for a long time, you might want to consider waiting for prices and offers to improve.
There are leasing agents offering nothing because they no longer have jobs. Drilling in the Permian Basin has slowed dramatically. If there was more drilling going on, this would allow an operator to hold the lease for as long as there is production, sometimes a long time, but you will receive royalty payments. If the land is never drilled or pooled, the lease will expire at the end of the primary term.
Mr. Allen,
First of all, you stated that the amount being paid ($400.00 per net mineral acre) is for an extension, not as bonus consideration for the initial Lease signing. So it all depends on the way that the Lease was worded, and without reading it it is impossible for me to say for sure. But I seriously doubt that the amount paid for the extension is negotiable at any point after the Lease was signed, that would be extremely unusual, and probably unique, from my review of thousands of Leases. In other words, it's not an "offer," it's an amount already agreed to in the initial Lease (usually it's either the same amount as the initial bonus consideration or exactly half of it). Either the Operator pays the extension amount, you can either accept or reject the money, and either way the Lease continues. Or the Operator does not pay the extension amount in timely fashion, and the Lease terminates.
Second, it is absolutely FALSE to state categorically that "If the land is never drilled or pooled, the lease will expire at the end of the primary term." It depends upon whether or not the Subject Property was leased along with OTHER lands. If it was not, then generally speaking that statement in quotations would be true. However, if it WAS leased with other lands, if there is production on any of those other lands, and if there is no Pugh Clause in the Lease specifying the terms underneath which the Subject Property would be released from the terms of the Lease, then even if the Primary Term expires, the Subject Property is still "Held By Production" (HBP) for as long as any of the OTHER lands on the Lease are producing, even if the Subject Property was never drilled or put into a drilling unit. It is not a very common occurrence, especially in the last 10-15 years, but nevertheless another example of how tricky this business can be for the mineral owner.
P.W.
Thank you Mr. Wrench for your expertise. You opened up my eyes to a lot of things we need to look at before going forward with anyone.
Pete Wrench said:
Mr. Allen,
First of all, you stated that the amount being paid ($400.00 per net mineral acre) is for an extension, not as bonus consideration for the initial Lease signing. So it all depends on the way that the Lease was worded, and without reading it it is impossible for me to say for sure. But I seriously doubt that the amount paid for the extension is negotiable at any point after the Lease was signed, that would be extremely unusual, and probably unique, from my review of thousands of Leases. In other words, it's not an "offer," it's an amount already agreed to in the initial Lease (usually it's either the same amount as the initial bonus consideration or exactly half of it). Either the Operator pays the extension amount, you can either accept or reject the money, and either way the Lease continues. Or the Operator does not pay the extension amount in timely fashion, and the Lease terminates.
Second, it is absolutely FALSE to state categorically that "If the land is never drilled or pooled, the lease will expire at the end of the primary term." It depends upon whether or not the Subject Property was leased along with OTHER lands. If it was not, then generally speaking that statement in quotations would be true. However, if it WAS leased with other lands, if there is production on any of those other lands, and if there is no Pugh Clause in the Lease specifying the terms underneath which the Subject Property would be released from the terms of the Lease, then even if the Primary Term expires, the Subject Property is still "Held By Production" (HBP) for as long as any of the OTHER lands on the Lease are producing, even if the Subject Property was never drilled or put into a drilling unit. It is not a very common occurrence, especially in the last 10-15 years, but nevertheless another example of how tricky this business can be for the mineral owner.
P.W.