Hi, this is a wonderful forum, thank you to everyone participating in this!
We are relatively new to this. My husband and I own mineral rights in Cimarron
County, Oklahoma, we are out of state. We have recently been approached by
a broker presenting us with a lease and am wondering if I can get information on fair market value in that area. I know there has been exploration in our area before awhile back, so not sure if anything is up and coming. We were offered $50 an acre, 3/16th royalty on term of 3 years, with 2 year option to extend for another payment of $50/acre. We have mineral rights for 40 acres. We plan to hire an attorney as well. I would greatly appreciate any advice. Thank you so much for all you are doing to help everyone!
Welcome! This sounds like a simple deal. I wish I had some data for that area for you, but unfortunately I do not. If you have any other questions about the process I would be happy to answer. I am sure there are some here who are familiar with the area. Good luck!
Thanks so much for the quick reply. Is there anything specific I should look out for when negotiating the lease? I'm trying to do a lot of research before hand so I have my ducks in a row. Thanks again!
Well, is your property and the bordering properties all have road access? I know one issue that causes problems are easement issues. I own a small oil and gas company and we never give any landowner an unfair deal. Usually its straight to the point. The main component is how will the interest be divided up. We never will go more than 20%RI to the landowner, and that is in extreme situations. Usually its an 1/8th or 3/16. This is just because we are spending our own money to get things developed.
The MAIN thing is how you feel about the people you lease to. Some you can tell are just doing their job, and might not pay close attention to your personal concerns on the property. Its all about being reasonable. Sometimes the oil companies are not reasonable, and sometimes the landowners are not reasonable. Sometimes its both! Your gut will tell you who is good.
I have not dealt with brokers before. We prefer to stick between landowners and the company. Not saying they are bad or good, its just third parties in many situations want a cut of the interest (which is understandable). Sometimes companies are too busy to do it themselves and have to use some kind of broker, but usually a company has a landman who handles these things. Many landmen are very genuine in nature.
Oh and another thing. I am not sure what the well spacing is out there. You can only put so many wells on so many acres depending on how deep the wells are in that area.
Hi Matt, thanks. We do have access to the property. We do not own the surface rights, only mineral rights. When you say you give 1/8 or 3/16 to the landowner, do you mean to the person with the mineral rights? Sorry if this is a dumb question. Again, thanks for the quick response, I appreciate it.
Oh not a problem. Well, in our neck of the woods a 1/8th is most common. So that comes to 12.5% of oil money to the landowner. If you own the mineral rights, but dont own the property you have a unique situation because usually the landowner will still hold some percentage. So you know what percentage of the mineral rights you currently hold?
So usually what happens is we come across a landowner and we want to work with them on the lease. They hold 100% of the mineral rights, and we work a deal out and we get 87.5% of the oil profits after we come in and drill. Sometimes the numbers are different.
You can always email any questions if you like as well I do not mind answering them at all.
Acsd shoot me an email briandstamps@yahoo.com if you like I can get you a little better royalty if you have not leased yet. Also an attorney is not need unless you just want them to read over the lease. Most attorneys are really unfamiliar w og leases so make sure if you do go that route to select one that has experience and expertise in the area
The main thing is not how you feel about the company. The main thing is to not let the lease say that you have to pay for transport, compression, refining, etc…those costs belong to the oil company, not you. You should only have to pay the excise taxes out of your share. Many companies will try to make you pay and that way you will end up with little or nothing. These guys are not your friends. They are in this to make money. Take the lease to your lawyer; if he isn't an oil and gas attorney he will know someone who is. You should not have to warrant the title either. That is sandman work that the company should do themselves. Do not sign up to re lease after the three years at the same price. Who knows what prices might be by that time. You might lose out on some serious money by agreeing to take the same as now.
Ask for use of the gas from the well site in your home if you choose and do not allow them to drill closer than 600 ft from your house. Do you want to live with that well? No you don't.