I have been offered $500.00 per acre, 3/16, 3 yr primary term with 3 yr option at 150% of leasing bonus. How does this compare with other offers?
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Sounds good , but I would not go for that (3) year option! Good luck
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It’s all about location, but that sounds cheap. Don’t do the 3 year option. If you will list your legals someone here can tell you what’s been going on in the area.
29-12N-14W, Custer County
3/16ths is common in the area. No leases have been filed in that section in the last two years, but there have been some immediately to your west in section 25-12N-15W. Are you sure you can lease? There are two active gas wells in that section which may hold it by production.
I received a lease offer not far from you on 33-12N-15W in Custer county. Can anyone explain what this means? In one offer on a 3 year lease option they are offering a price on (all formations) on the second proposal 3 year option is surface of the earth to the top of the Mississippian formation. I only wanted a extended 2 year option but they want 3 years. I just don’t think I want to try these mineral rights up for 6 years. Any information would be greatly appreciated.
33-12N-15W has an old dry hole on it. New leasing is usually for the Red Fork or Cherokee for horizontal wells.
Personally, I do not sign leases with extensions. It gives the lessee way too much power. Too much can happen in the three years, much less giving them another two or three years. I prefer to deal with the competition at the end of the primary term if they do not drill. I do not want them tied up for more than three years.
The current trend in leasing in this area is mostly for the Oswego, Red Fork and Cherokee formations. They are part of the Pennsylvanian System which is just above the Mississippian System of formations. Most folks that lease want from the surface of the earth to the center of the earth, but some carve out certain formations.
We have minerals in this section too, offer to lease it, sent out the paperwork. I called the lease person, and told them we were still getting production checks, so they removed their offer. They had no rights to lease, the lease was held by production.
Thank you. We turned down the offer they would not budge on the 3 year lease option. We will wait for something better to come along. We (my sister) and I did not want to tie it up for 6 years!
IT is probably more important to decide based on royalty and bonus per acre. Your lease will have a certain number of year term, meaning the length of time they have to drill a producing well, usually 3 years. On the option, I try never to grant an option. It gives the company all the power. If it turns out the going price at the end of the lease is more than the bonus you agreed on, they will exercise the option and you get less than someone else would pay. If the option is for more than the going price at the end of the lease, they will just decline to exercise the option, let the lease lapse and then come and offer you the lower going rate. There is no benefit to the land owner to agree to an option.
You could tie the extension to a favored nations clause. the inclusion of an MFN in an oil and gas lease, guarantees that the lessor’s bonus and royalty payments will match any lease that includes a higher bonus. However, oil companies hate these clauses.
Post is a bit confusing, you say that you dont want to tie up the minerals for 6 years, when did you sign the original lease with the 3 year option to extend? If you didnt want to tie up the lease for 6 years, why would you sign a 3 year lease with a 3 year option?
I didn’t sign the lease. That was my point there was no way I would tie the property up for 6 years. 3 upfront and 3 on an option.