Bonus paid on exercise of option?

Oil and Gas Leasing Help
1

In Colorado,if the oil and gas company decides to exercise the option ( 3yrs with 2yr option), is the bonus paid again? Does that need to be written into the lease? and if the bonus is paid again is the amount the same? Thanks, Cindy Schoeppel

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2

Ms. Shoeppel, I would not sign a 3 year lease with a option to extend for another two years. A flat 3 years would be best. I would tell the company that if they needed a lock on my acres for 5 years that they would have to pay for all of it up front. If your acres get a good well nearby, the lessee will pick up the option, if you have one. If a poor or dry well is drilled near you the company will not pick up the option although they may make you a new lease offer for a lesser amount. With an option in the lease, the mineral owner can't win. It's a heads the lessee wins and tales you lose situation. If after understanding this you intend to sign a lease with an option anyway, yes there should be a bonus for the option and the amount should be spelled out in the lease or your attached exhibit. Good luck.

3

Thanks Mr. Kennedy, when you say for a 5 year lease that they would have to pay for all of it "up front". Thanks, Cynthia Schoeppel