Coming to terms with an oil company

#1

The company has drilled several wells and are in the middle of drilling several more. If you cant come to terms can you lease to a new company? How does that work?

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#2

Are these wells on your minerals or on other sections? If the wells are on your minerals, then your lease will not expire at the end of the primary term. If on other sections, have you received an offer for a new lease from the oil company?

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#3

I’m am not asking if I can get a new lease. Half of the NMAs inherited are under the original oil lease. The other half came into community property from a divorce which a new lease is what is being negotiated now. Anyways, I’m asking what happens when you don’t come to terms with a new lease? What reasonable leverage does the mineral owner have? The 5 wells that are drilled and online are very good. The royal rate seems to be pretty good but the bonus per acre seems a little low. They do not want budge unless they lower the royalty rate which is not going to happen.

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#4

You have minerals in Section X which are under lease. You have minerals which are not under lease. Are they in the same section and wells? Or another area altogether? If the unleased minerals are in Loving County then you should get 25% royalty. You can lease the minerals to any company. That company can participate as a nonoperating working interest in the wells. For more detailed responses from people on this forum, you would need to post more specific information.

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#5

Thanks for the input. Looks like you answered my question. I wasn’t looking for a detailed response just a basic answer to a basic question. To answer some of your questions yes its all under the same sections. Yes 25% is what is offered. What do you think a lease bonus for that county would be reasonable for a small interest owner like my self?

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#6

The bonus depends on the location and the circumstances and what you consider low. You should consider negotiating the lease provisions such as cost-free royalties, depth releases, etc.

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#8

As a landman if the only thing that they are fighting you over is the lease bonus you could contact some non-op groups and solicit some offers. As long as there isnt some drastic clause in the lease that the operator will not take such as a favored nations or something like that I think you can still work through this issue. If its a good area and youve hit a wall with the operator, it doesnt hurt to call some other groups and put the burden of working things out with the operator on them. The risk in this scenario is the operator also doesnt have to work with the non-op group.

In the event you decide to take the lower offer from the operator make sure to ask if you will receive the royalties from the date of first production, that could be a good amount of money, and may make you feel more comfortable taking the lower bonus to insure you get some mailbox $$.

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closed #9
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