Is it standard procedure for offers to lease adjacent parcels to vary by a very wide margin? In particular, in the West Texas Permian Basin, one lease offer was for $1000 per acre, and another offer for adjacent land was for only $350. This seems to me to be very low. Any comments?
Mike:
There are many factors that effects the bonus offers such as how close the acreage is to proven production, etc. Another factor is the game a lease company plays whereas they contact all mineral rights owners in an area (often out of area residents) and make a low offer hoping that the individual(s) are not aware of the going bonus rates in the area. Also, some are willing to compensate the lessor with a higher % royalty amount while bidding low on the bonus/acre amount. This scenerio is actually my favorite as I put much more emphasis on the % royalty than the bonus/acre amount.
Mr. Harrison, the landman trying to lease your acres first consideration is to lease the acres, second is to lease them as cheap as he possibly can. An O&G co without mineral acres to drill would be one going out of business. They need acres, cheap if they can get them cheap, but they will pay more if they have to. If the price is too high they lease other acres, but they want yours or they wouldn’t ask. Some land owner may lease for 350 per acre and the leasing agent will pick up the other $650 and possibly a nice overide royalty, if they can keep the royalty rate low also. On this forum an operators landman has said ( in reference to ND ) that the operator gets 80% and the landman and mineral owner are negotiating on how much of the 20% the mineral owner gets to keep. Tx appears to have a wider margin in some areas, the operator will accept 75%. I think you have to study ( as you obviously are ) and make the best bargain you can.