I just received a lease from Drake Exploration for a small tract my family owns in Anderson Co. within the Isaac Parker survey #622. Terms are 4 years with 2 year option, 20% cost free royalty, $500/NMA bonus. My father, who spent his entire career in the oil & gas industry, negotiated leases on behalf of our family however he passed away recently so this is the first lease I’m handling on my own. In reviewing other leases we’ve signed in Anderson Co over the years, they were all for 3 years + option years. Should I push to change the term? Does this seem like a fair offer for that area? Thanks in advance for any feedback! BTW the bonus is being paid by Expand Exploration.
Be cautious of the preferential right to purchase your minerals clause. Push back on that and they will fold
How do you know that it is a “cost free” royalty? If the language in the royalty clause says “at the well” then saying “no cost” royalty means nothing. Also, producers/operators are very adept at drafting leases which appear to grant a “no cost” royalty but actually allow all post production costs. Since I presume this will be a gas well, costs will eat up a large percentage of your royalty unless you draft the lease carefully. The “Post Production Costs” issue has been the subject of numerous court cases recently. We have modified our lease 3 times in the last 18 months to keep up. You need professional advice for this lease. As to the other provisions, I would start at 3 years with no option and make them negotiate for an option. If they press for an option, you should ask for an increase in the bonus for the option years. That will cover you if the lease becomes more valuable after the primary term. I would not grant them a 4 year lease. Also I would ask for 25% and more bonus. I would hire a good Oil & Gas attorney to handle this lease. There is too much at stake.
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$500 NMA does not really move the needle in 2026 in the Leon, Freestone, Anderson co areas.
And inspecting the details on that “cost free royalty” is incredibly important, as said prior.
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On the no cost, I would fight for something like this: royalty shall be free and clear of all costs and expenses of exploration, drilling, completing, equipping, gathering, compressing, dehydrating, treating, processing, transporting, marketing, and otherwise making production ready for sale, except only severance and ad valorem taxes actually imposed by law. Royalty shall be based on gross proceeds received in the first arm’s-length sale and shall not be determined by “market value at the well,” “net proceeds,” or any valuation methodology that permits deduction of post-production costs.
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You are dealing with a broker that represents Expand Energy, (old Chesapeake company). 1/4 cost free royalty. Get you a good Oil and Gas Lawfirm. Do not use local attorneys.