Own mineral rights in numerous counties - some interests translates into quite small amounts: less than 1 acre or 1.5 acres. If we’re approached for lease on these small tracts, do we have any leverage in negotiations? Would it be better to try to negotiate the bonus or the royalty? New to this and trying to get it all figured out! Thanks!
Actually, you may be in a superior negotiating position.
This is a negotiation on economies of scale.
For example, if you have 5% interest in 160 acres and they have leased the other 95% for 3/16 and that is their offer to you and you want more.
Here is your strategy:
Dear Mr. Oil Company,
You leased 95 % of 160 acres at 3/16ths royalty. If you lease mine at the same, your net revenue interest is (1-.1875)*100, or 81.25% .
That is not satisfactory to me. I want 25% royalty.
If you accept my counter offer, your net revenue interest would be (1-(.18.75*.95)+(.25*.05)))*100, or 80.9375%, or a difference so small that you will spill that much every day.
Be reasonable and let us go make some money together.
Great Buddy! How do I find out what other interest has been leased at? Do I take the landman’s word for it?
Dear Ms. Coker,
Take the landman's word. If he is lying, he is hanging himself with his lies, because he will lie on the low side.
This is just one strategy of many, many, many that I use on a daily basis.
By the way, I needed to put in one more "(" on the formula. Deduct one point.