Just received an offer from MGH Land Management, LLC to lease our mineral acres. A Three (3) year term. $200.00 per acre bonus. Does anybody know what is going on in this section? Is this a good offer? No indication as to the name of the well or the Oil Co in the paperwork. Also strange wording on the Oil and Gas Lease…"“WITNESSETH, That the said lessor, for and in consideration of Ten and More Dollars cash in hand paid…”. 10 Dollars?? Don’t know if this is legitimate or not. Seems fishy to me. Please advise.
“Consideration of ten dollars” is on all leases and is just an arbitrary number the companies throw in there so they don’t have to record what they REALLY paid. There is also room to negotiate. $200/acre sounds low to me.
Thank you Courtney!
$200/acre sounds low to me too! Was just offered $500/acre in McClain Co. Should I mention this to perhaps bump the bonus up?
All My Best,
Unfortunately, having a higher offer in another county will not help you. Even within the same counties, prices can vary widely. How many net acres do you own?
Agree 100% here. It is just like the surface rights, price a house on a lake shore with a view of the lake. Then go 6 blocks and compare a similar house. It is all about location location location!
Canadian county typically does not have large producing wells. So it is less desirable and has less competition
Based on Canadian County pooling orders in the last year, only $200 with a 3/16 royalty is a pretty fair offer.
|201604774||$175 -1/8RI |$150 -3/16RI |
|201703598||$50 -1/8RI |$0 -21.25%|
|201704759||$100 -1/8RI |$50 -3/16RI |
|201605204||$200 -1/8RI |$175 -3/16RI |
|201707489||$100 -1/8RI |$50 -3/16RI|
You can look up the details here with the Cause/Case number. Link -OAP
Some things to think about.
The bonus amount paid and the Royalty interest MAY not be the most important part of your lease.
More often than not, people lease for less desirable terms than they would have received by making an election in a forced pooling.
Overall, less than 1/3 of all leases get drilled. So with a lease you may make money on the bonus and then the property is yours to lease again in 3 years. (In my families case, the percentage is far lower then 33%)
Once they drill it an it is held by production you have to live by your choices. Likely for the rest of your life and a few generations beyond.
If you own less than the entire unit, your decision to lease or not “should” not have an impact on the property getting developed or not.
You have to evaluate your entire situation when you make your choice. I commend you for doing research and asking questions instead of checking a box, signing and sending it in.
Edited to fix RI amounts on the right side of the table.
A little over 9 acres.
I forgot to mention that they are offering 1/8 part of all oil as well.
All my Best,
The offer is $200 per acre and royalty of 1/8 of all oil.
All My Best,
This is a quote from a post I made yesterday. While the acreage numbers and bonus numbers quoted may not be representative of your case, I personally would never elect to take a 1/8 RI in the state of Oklahoma. The only advantage would be if I was SURE they would not drill. Unfortunately, my crystal ball does not work well enough to know that.
That said, I’m kind of a numbers guy and I like data.
This year in Grady county I show about 2100 leases have been filed where I can determine the agreed upon RO. . Less than 30 of these were for 1/8 royalty interest which is the statutory minimum. Another 5 or so were for 1/6. About 900 were for 3/16. Around 600 were for 1/5. About 550 were for 1/4. The remaining 30 or so were for 21-23%. Data in other areas I have pulled previously have been similar.
If that does sway you, I’ll throw this out there. As far as I’m concerned, 1/8 RI is a suckers bet. The only way they are going to tie me into a 1/8 RI is by force pooling me and that is the only option. That is if it survives the protests of the said pooling at that the corporation commission.
Please correct me if I’m wrong but it sounds like my best bet would be to wait for notification from the oil company’s attorneys of an impending pooling order? Or should I attempt to negotiate with MGH Land Management, LLC for 3/16?
All My Best,
Jack, I just noticed the right side of the table I posted was incorrect. I had most of the entries as 1/8 and they should have been 3/16. Fixed.
If you look at that table you will see that there is not a lot of difference in 1/8 vs 3/16. So I would guess you might be able to agree on a 3/16 RI, for about $150-175. $200 and 3/16 might be possible.
But there are several other things about a lease. 90% of the time they are going to send you one that is heavily slanted toward the operator. Some are “fairer” than others, some are grossly slanted.
You need to consider several things.
Term, usually 3 year.
Option to extend term Usually 0 or 2 years (I don’t take options)
What post production deductions you are willing to all them to take.
Warranty What is your exposure
Defining commencement of operations,
Negotiation Shut in
Top Lease restrictions
Mother Hubbard Clauses
Define Force Majeure
and so much more
Keep in mind, these clauses and subjects vary greatly by the words that compose them. The titles mean nothing.
Search on these terms and do some reading on the subject. They may be pressuring you for time. If nothing has been filed, (it hasn’t) I doubt there is any hurry. The worst than can happen is they loose interest in your property. If the interest was valid, it is likely it will come back unless the market flops again.
Treat this like you are selling your property. If it reaches production, the lease goes into the secondary period. This is as long as the covered property is producing in commercial quantities. Loosely defined as profitable, even minimally. You are taking a down payment (lease bonus) and the remainder of the payments will be in the form of a commission (the royalty interest) of the products produced from it.
What if we leased surface rights that way? You lease 9 acres for 3 years for a guy to prepare and grow corn on it. You agree to 200 an acre for the 3 years and 1/8 of the sales of the corn. At 5 years he is still selling corn but now the soil isn’t as fertile and production is greatly lower. So he plants a few rows in different areas of the field to keep the lease “in production”. He makes a small profit to cover his time, pays you. Everyone is happy right? Not really, your income dropped dramatically and he is not doing things to increase production exploring other products, reworking the land. He is simply holding it hoping someone else with deeper pockets will come buy and he can assign it to them. He make some money on the assignment, maybe makes a small cut on the future production and you still get your 1/8. It is really much more complicated than that, but that is basically what is going on.
All My Best,
Jack5, we received a ‘fishing’ offer in the mail a number of weeks ago. Eventually I signed up with US Mineral Exchange and they advised me that many of these out-of-the-blue offers are a bait and switch operation. if you WANT to sell your rights find an entity that will take a commission on the sale and that ALSO GUARANTEES you don’t HAVE TO ACCEPT any offer, even if it is the best. There is a lot of misinformation being thrown around that is meant to confuse and rush you.
I had a gut feeling that there was something fishy about our offer. This outfit doesn’t tell me the name of the oil co. they represent, the name of the well and also won’t even return my calls. I’m starting to get paranoid now,
All My Best,
Thanks a 1,000,000 my friend!
I had a very queasy feeling about MGH.
I’m thinking now that I will just ignore their offer and wait it out.
All My Best,
I am most grateful for this information.
So sorry that you got burned,
I don’t think that I want to do business with these cats.
All My Best,
I am not that up on Cleveland county but 200 per acre sounds low.
I have had 2250.00 to 3000.00/acre offered in McClain.
Still waiting. Norma, California
Wow! That is a lot!!