Far-flung members of my family (from Florida to Oregon) have been contacted by a Landman in Tyler, Texas, asking us to sign an Oil, Gas and Mineral Lease with the proposed terms:
3 year Paid Up Lease; 15% royalty: $250 per net mineral acre bonus for signing; three year option to extend for an additional $250 per net....
He is representing the oil company and we don't know which one it is. Do we care?
Included in the documents we are to sign is and Order of Payment form. And we are told we will receive our check within 30 business days after they receive our executed documents.
We have talked to the Landman and he seems very nice but is he telling us all we need to know? And are we being paid a reasonable amount?
We have interests in Reeves County, TX. I don't know anything about Cooke County so take that into account. For Reeves, $250 an acre is ridiculously low. Bonuses here are in the thousands per acre. Fifteen percent is ridiculously low. The general percentage here is 25%. It is not a good idea to agree to an option to extend. That favors the oil company, not you. (If bonus rates go up in that three years, they will exercise the option and you will be stuck with the original low rate. If bonus rates go down, they won't extend. You have nothing to gain.) It's a bad idea to hand over a signed lease without getting immediate payment. If they don't pay in 30 days, you will have to fight to get your money and may never get it. In the meantime, they have your signed lease.
There are many possible pitfalls in leases so you may want to hire someone to look over the proposed lease for you. There are a number of good people on this website. We have used Wade Caldwell and have been extremely satisfied.
There is a Cooke County group on this website that you can join and those folks will know more about your area.
This landman may seem like a nice guy but he seems pretty slick to me. Best luck to all of you!
I just checked the Cooke County group and it is not very active. Maybe they won't be able to help you. Hopefully, there are some other people on here that know more about going rates in Cooke than I do. But the other provisions you listed are bad no matter what county you are in!
Janet, 15% royalty is an insult. Most all oil companies now days in Texas pay 20 to 25% royalty. No, don't accept that royalty percentage. Possibly the $250 per acre is close to being right. Can you tell me what leasing company in Tyler he was working for? I agree with every thing Liz says except the bonus money for Cooke County. The wells in Cooke County are not to be compared to the wells in Reeves County. The production is not near as good in Cooke County. This landman may be a slick operator as Liz says.
Clint, the company is Concord Land Services in Tyler, Texas. I think he has all the others ready to sign, so I'm not sue if I want to muddy the water. Would my terms change the other agreements?
Janet, you do not all have to sign the same lease. This sounds like a very bad lease. Personally, I would not sign it. I would do my best to convince other family members not to sign it. You could hire someone to help you come up with a counter offer. But I do not know how serious this company really is. They may just be trolling the waters to see if they can come up with some uninformed people who will sign this very bad lease - and so they wouldn't be interested in a different lease. Or they might be serious and just trying it on first. But you do not need to sign this lease even if your relatives do.
Remember, if you sign this lease, you will be stuck with its bad provisions for at least six years - and there could be other bad provisions tucked in the small print. If they drill, you will be stuck as long as they operate the well, though it could be pretty much forever even without a well if there are sneaky provisions in the small print. Leases are very, very tricky things. There are sample leases on this website somewhere that will give you an idea of what a decent lease should say.
I agree with everything in Liz last post. And make sure you have a NO POSTPRODUCTION COSTS CLAUSE included in your lease. These folks and relatives all need to try and get on the same page with their leasing. These oil companies/producers are not in the business to make you or the other mineral/royalty owners money. You sign your own lease no matter what the others do. Good luck.
