My family has mineral rights in Custe County, OK, S09,T15N,R19W. We received a letter giving us 4 options to lease the acres. 1. Pay part of the drilling costs, 2. 1/8 royalty and $600/acre, 3. 5/32 royalty and $550/acre 4. 3/16 royalty and $500/acre. Letter says if we can’t reach an agreement, they will file to have our acres pooled. We typically always get 3/16, but have got up to $1500/acre back in 2011-2014. There is a proposed horizontal well for sections 9 & 16. Are these amounts fair? Thank you.
This is a “courtesy” letter before pooling, so the amount are usually pretty close to what they will offer at pooling. You do not have to answer the letter. Investing as a working interest owner is not for the novice. You need deep pockets for potentially decades of costs, but does have some tax advantages. Also need a good accountant, attorney and insurance, plus safer to have any working interest in an LLC to protect more against liability.
Most of us would prefer the highest royalty even though the bonus is lower. Many years of higher royalties on a successful well or wells usually far outweighs a one time bonus for a smaller royalty. Past offers are not indicatve of today’s competition, so are not useful for comparison.
You can either lease with the operator or you may get more offers from other parties closer to the pooling date or you can go with pooling. If you have not leased in a while, it is wise to get a good oil and gas attorney to edit any draft lease as they are rarely in the mineral owner’s favor. Pooling in OK has its own advantages, so you can wait for that.
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Thank you for the information.