I've recently had an offer for a one-year lease in the Bull Butte area of Williams County for 600/acre and 20% royalty.
Since I live out of state I don't know anyone in the area I'm unsure if this is a fair deal or not. I've been reading here about some leases going for much more.
I'd appreciate any advice you can give.
Larry:
$600/acre is way low for this area. This Bull Butte area is currently being drilled and is comprised of several good wells. I leased some acreage just North of this area in the Strandahl Field over a year ago for $1500/acre. I would not lease for less than $1500 - 2000/acre; no less than 20% royalty . I would also consider adding a pugh clause in the lease as they will be interested in the Bakken Formation most likely. This will allow you to lease other formations in the future such as the Three Forks. The operators most active in this area has been Oasis, Marathon and G-3. Whoever is offering to lease your minerals must be planning or has already scheduled a well in your mineral area since only a one year lease is requested. All sounds good except the bonus. I have minerals in the Strandahl Field, located just North of Bull Butte and I leased for $1500/acre nearly two years ago when not as many wells existed in these areas.
Larry, if it was the first offer, they hope you will just execute it and send it back, the numbers say that 85% of mineral owners do just that with the first lease they see. At this point you can try to get competing offers or make a counter offer, you could start high around $2500 an acre and let them negotiate you down. As Charles said, terms in the lease are also important and you should get more money if you give up pugh clause or depth severance. A one year lease tells me either they have already drilled the well or they are very serious about drilling. If you already have a well drilled, possibly already producing, I would want to know going in to negotiations. You can go to the NDIC O&G site and use the GIS server map to look for permitted or operating wells in the spacing in which your legal description lies, you can get the numbers by the well dots and search the confidential well list which is also found on the NDIC site home page. If you need any help with the search, let me know.
Thanks both of you. I had assumed $600 was low considering the area but had no clue. I really appreciate the help.
Larry,
Take your time and don't get in a hurry to lease as doing so will most likely end up being a big mistake. Your minerals are located in a very good area .
Larry Jonster said:
Thanks both of you. I had assumed $600 was low considering the area but had no clue. I really appreciate the help.