Current Leasing Value

We have been approached to lease some acreage in Martin County but not sure what is the going price per mineral net acre. Does anyone feel like sharing information??

Hi Jennifer -

It varies by Lessee and location of course, but I have heard parts of the area referred to as the Martin County Stack, so there is activity going on here. I’ve seen offers ranging from $3500 NMA to $10500 NMA. Do you own surface acreage also? Sometimes the larger your NMA the larger your negotiating power.

Have a great day! Lana

The interesting thing is this: its a closed well that they want to release; I have also found that there is a proposed horizontal well that they seem to want to drill in the near future; truthfully the NMA is small but I want to be able to get a fair price which is actually in the middle of the values you gave. It is in the NW part of the County.

Where is the Martin County Stack??

I’m not a reservoir engineer, but I’ve heard talk that it is in the southern part of the county.

I’ve seen that before - they want to negotiate with you on the acreage so that they can in turn be a part of the horizontal well - which will ultimately benefit you. I have heard that some development is happening in the NW part of the county soon, especially in the Knott area.

I’d have to look on the map to see where Knott is, lol. Like I said the acreage is small but with those kind of possible offers, we would be dumb NOT to want the highest available, right??

That’s why you need to understand what you have and what is going on around you. Research and understanding is the key to getting the most value from your minerals. What you have may seem small, but remember this - you cannot buy mineral interests at Walmart - and a small mineral interest could turn into healthy mailbox money. Don’t be afraid to negotiate - the worst thing they can say is no - and if you don’t ask they already said no.

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For Martin County, the most important part of leasing will be the lease terms since there is a high likelihood of development. There are roughly 20 rigs running right now, all across the county. The eastern side is “hotter” at the moment (and probably what the “stack” term is referring to? I’m not sure, the whole are is stacked…sounds like a PR term a company made up), but I definitely don’t hate the west/northwest side. There’s a high likelihood for every section to be drilled with 6-8 wells per target, with at least 4 targets. Drilling one well or partially developing a section is a way for operators to test targets, hold leases with production, and manage budgets, but in a proven area with the right budget (like Martin County + a larger operator like Diamondback/Exxon/EOG/Pioneer), the ideal situation to maximize the reservoir is to drill it all at once.

If your lease bonus is around $7000/nma (based on your comment), that’s not bad, but leases are HIGHLY negotiable. Time to make sure all the other parts of the lease are favorable. I’m not a lawyer, and I recommend having a lawyer review the lease language before signing if you have enough acreage for the finances to justify. These leases can be in place for 50+ years once a well is producing so you don’t want to get stuck with poor terms.

Items to look for in Martin County:

  • 25% Royalty
  • No post-production costs (language like, “royalty reserved herein by Lessor shall be free and clear of all production and post-production costs and expenses, including but not limited to, production, gathering, separating, storing, dehydrating, compressing, transporting, processing, treating, marketing, delivering, or any other costs and expenses incurred between the wellhead and point of delivery or sale of such share to a third party.”)
  • 3 year primary term
  • No option for extension
  • Clearly defined shut-in limitations

There are others but those are some of the main value swingers.

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I really appreciate your last comment!! Words to live by in the oil leasing world!!!

Thank you and yes, its close to that but like you said the leases are HIGHLY negotiable and WE will be negotiating!!! I have a question: are you recommending to Not have an option for an extension or that they might leave that out??

I recommend not having an option to extend. It’s only really a benefit for the lessee, not the owner. You’re unnecessarily giving them options you don’t need to give. If three years down the road they still haven’t drilled, they can just pay the cash and kick the can longer. Or do nothing. Or just choose not to extend and release at a lower rate (unless that’s addressed in the lease language). It’s basically a 5-year lease just with crafty language to make it seem like a 3 and give landmen more negotiating cards.

I suppose this could be a benefit for owners with complex leases who don’t want to go through negotiations again on terms and think the bonus is relatively stable, or if you’re getting more bonus so the lessee can avoid a top lease (like a back-up lease, or “next dibs” lease), or if terms are different in the extension period. But either way it’s a term that would require a higher bonus with it than without it… I just would want only the most favorable lease in Martin County. You should be able to get what you want there, be it more money or better terms.

@tracy_lenz same question for Reeves County. NE/4 and E/2 of NW/4 of Section 26, Block 50, Township 7 South, T&P Ry.Co. Survey (243.23 acres). I know hard to predict, but range of BPA for that part of Reeves?

Great information here @tracy_lenz and I agree. Remember @Jennifer_B, once the lease is under production you are stuck with the terms. Also, be careful to look at your lease rates. 1/5 to 1/4 is doable these days, so ask. Always ask high first. Oftentimes fractions can be confusing and a bigger bottom number can seem bigger to the eye, especially when you are being hounded to lease. Take your time and read every word of the lease…ALOUD. Then get an attorney or minerals advocate to read it for you. There are a lot of great mineral owner advocates out there nowadays and NARO can help you find someone with the expertise you need. The fewer years the better. It forces their hand to get your minerals drilled instead of holding out for a better percentage for themselves. Martin County is hot right now, so odds are you could be drilled on soon. But don’t settle for the first offer that comes along.

I can take a look and see if I have any info. I’ve been poking around Martin/Howard/Dawson a bunch lately so this was easy enough. If you could, go ahead and make it a new post in the reeves county category so it’s easier to find for others later though :). I’ll answer it there!

@tracy_lenz would you read the following portion of the lease and let me know if it follows one of the points you mentioned.

It is agreed between the Lessor and Lessee that, notwithstanding any language herein to the contrary, all oil, gas or other proceeds accruing to the Lessor under this lease or by state law shall be without deduction for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form.

Does this sound like this meets the no post production costs you mentioned?? It does to me but sometimes when I read legalease, it can be confusing as they want it too.

Google “BlueStone v. Randle — A Win for Royalty Owners on Post-Production Costs”

also search “Texas Supreme Court No. 19-0459” and read the opinion on Justicia law

Hi Jennifer,

OK, so…treading lightly in legal territory here…

A) I’m not an attorney nor do I claim to be an expert at legal matters. A licensed attorney is the best route to go.

B) From what I understand of the law, even the best terms can be unwound by something elsewhere in the contract. A contract must be interpreted altogether as whole, in a way that satisfies all parts of the contract (paraphrasing a legal thing I’ve heard, possibly not 100% accurate way, but you get what I mean. Everything in the contract matters, and you can’t isolate any sentence for interpretation without proper context.). “notwithstanding any language herein to the contrary” is a good start, but still.

C) With all that above in mind…I don’t personally see an issue with the phrasing of that language. If I had to play devil’s advocate, I’d poke at things like the term “marketable form”. I say this simply as an engineer who reads leases trying to figure out how to model the economics of the language written: the specifics around what is considered a deduction and what is considered market pricing can be gray area.

The language I pulled is from an older case than the one AJ11 mentioned, so that might be a more modern way handle it since post-production costs have been litigated a bit since then. My reference is:

I don’t have any personal knowledge of the attorney who writes that bog’s reputation, but I did review the case with my non-legal eyes and it seemed to apply.