I have mineral interest in Lea County, IN SEC 34&35 T17S R37E NMPM Have had offers for 20% royalty for my 8-10 NMA’s. They also are offering to convert it to working interest. I have never heard of this, but wondering which is best for me. I think there is a Matador well 2 miles from me. Is this area worth more than 20%?
Working interest is not usually for the basic mineral owner. You have to have the deep pockets to pay your share of operating costs and plugging costs for years, maybe decades, and your heirs may or may not appreciate the hassle. You will need a good tax accountant, attorney and drilling and liability insurance. Many folks have to set up an LLC and move the working interest mineral owership into it to protect from personal liability in case of a disaster. There are tax benefits on the other side of the equation.
Matador does have permits for Bone Springs horizontal wells in sections 11/14.
All the leases filed to date are listed as a Memorandum of Lease, so the royalty is not public.
It would be very wise to invest in a good oil and gas attorney to help with the lease negotiation as the draft lease is not in the mineral owner’s favor and needs significant edits.
Thank you Ms Barnes. I always learn from your posts.
NM has compulsory pooling. You can lease, opt to be WI and pay costs upfront, or you can also opt to be an unleased mineral owner, instead of signing up as a WI. Unleased mineral owners receive statutory 1/8th royalty and the remaining 7/8th participates after payout plus penalty. Pooling order will set penalty, generally 200%, so payout is after costs + 200% penatly (total 300% costs) are recovered. Link below describes the process. Matador seems to be very hung up on the 20% royalty, so the question is whether you are able to get better lease terms. New Mexico Forced Pooling Guide for Mineral Owners