Hi. We live in Township 4S, Range 64W near Watkins. Conoco has hired Centex to negotiate a mineral lease extension. Does anyone know what the going rate is per mineral acre? They are telling us they won’t pay more than $750 an acre and the gentleman was acting very pushy. Any info or advice would be appreciated!
What they want to pay now or willing to pay later are two entirely different scenarios. The best contracts are when mineral owners are very patient. I am not a huge fan of landsmen, but they are only doing their job which is to negotiate the lowest bonus & royalty. Remember back in 2010 when GFL’s first offers were $25 per acre for five years with a 5-year kicker at 150% with 1/8 royalty. Many mineral owners were mad & embarrassed for not paying attention and tying up their minerals for 10 years. In late 2010 many owners received $1500 per acre, 1/5 royalty, 3-year lease with 125% kicker for 2 years. Then in 2011 bonus reached a high of $6500 for state land which was grossly overpaid in my opinion.
In May 2011 we received $2500 per acre, 4 years with Pugh clause, 2-year kicker at 125% and 1/5 royalty. We don’t expect Conoco to exercise the option come May.
Conoco’s production in the early stages was not very impressive but the last year they have some really good results:
Zukowski Section 17 Township 4S Range 64W 16,066 bbls Oct 2013 but has declined to 3,381 Aug 2014
Bomhoff Section 9 Township 4S Range 64W 21,091 bbls May 2014 (very nice)
Tebo 4 Section 4 Township 5S Range 64W 12,850 bbls May 2014, 15,199 bbls June 2014, 11,067 bbls July 2014
There have been a few earlier wells which may never be paid for:
Tebo 3 (one section east of Tebo 4) 3,191 bbls July 2013 and has declined to 679 bbls Aug 2014
It is hard to determine the bonus value, but $750 is very low. If your minerals are in one of the sweet spots the price is higher, if Conoco has applied for drilling permits in your section would also increase the value, is there productive wells next door? Not knowing your circumstances I will give you my 1 cent of knowledge. Remember location is important.
Bonus: $1300 to $2500
Royalty: No less than 1/5
3-year lease with NO Option (options are useless to mineral owner)
You may also try for a maximum 6 months of flaring and after that you want paid.
Be patient and let this mature, you own the minerals that Conoco wants. They love low hanging fruit.
Good Luck & let us know the outcome!!!