Paschal Energy sent me the lease forms for $95 an acre. I’m not going to sign because they are insisting that I warrant title (their job), an O.O.P.s agreement is required (crazy), first right of refusal and other items.
You can’t just get the terms right as far as the amount per acre, length of lease and royalty interest because I have just learned the hard way they will try to take you to the cleaners on the terms of the lease documents. I am pasting some comments made by Eastern MT here on a Paschal discussion.
Reply by Eastern MT on July 7, 2011 at 7:13pm
Shelly, I’m not sure what your concerns are, yet what you posted appears normal to me. Oil companies typically hire individuals or other leasing companies to contact mineral owners and secure their leases. So Chesapeake having that man, or hiring “Paschal Energy” out of Douglas, Wyoming, to lease your minerals is normal business practice. As to the sample lease sent, the standard lease many companies offer is one of the countless variations of a “Producers 88” lease form. One of those variations is a “Rocky Mountain” version. I’m guessing that is what you received. It is not a bad form but it needs to be modified with an Addendum to protect your interests.
If you own a fair amount of net mineral acres, or you’re new to the process of oil & gas leasing, you should hire an attorney to represent you during this process. If you’re comfortable doing it on your own then read it all very carefully and focus on the basics; a three-year lease without any extension, a fair bonus rate, a 3/16th royalty, include Pugh clauses, limit their shut-in clause, don’t warrant title, and most importantly don’t deliver a signed lease to them until you have actual payment in hand (not just a “Draft” or “Order of Payment”). Good luck, I hope you get a great deal.
We’ve all got to be very careful before we sign anything even if it is going to be a deal breaker.