EQT Bridgeport WV Leasing

[dfellows5]

Hello everyone. I am a 22-year Military Retiree and 20-year Quality Control at NASA here on the MS Gulf Coast where I was born and raised. The reason I let you know this is to tell you that though I can do wonders with Aircraft and such I have no idea about mineral rights and negotiating a lease.

Last week my wife got a call from a Headhunter of some sort for EQT in Bridgeport WV. After verification she got a call from EQT Production CO. Seems her Great Grandmother had mineral rights in West Virginia (which my wife is the only heir) and now EQT or another company wants to do 1 horizontal well to begin and possibly up to 6.

They want to lease for 10 years and royalty when and if it produces (he said 16% but also said 1/8). When he calls us next week I will get the City and County and size of land in which the Mineral Rights are owned hopefully. I started researching and trying to learn but I am still not sure of stuff.

I could get a lawyer involved but don’t want to spend $5K to collect $2.5K so to speak (not real prices lol). Can anyone direct me to someplace where I can learn more in addition to Mineralweb.com? After we talk to him next week I will update location and any other info.

I have just read horror stories from people losing and possibly being cheated that I am very cautious of signing a lease and such. Thanks for any and all info you may be able to give me.

[M_Barnes]

Welcome to the forum. Thanks you for your service in the miliarty and NASA!

I will answer some of your questions here to get you started. It is best if you post anything having to with West Virginia in the West Virginia/County and topic area. Folks that watch that area will look there first and can help more specifically.

Your wife most likely got a call from a landman representing EQT which is an oil and gas operating company in West Virginia. They are trying to clear up her title and want to lease.

Ten years is a really long time to lease, so that is where asking that question would do better in the particular county. Shorter is better for most of us. Three years is common in OK and TX. Five years in some states and ten years will often be tried, but most of us would limit to a shorter time. Ten years implies not much is going to happen for a while and we don’t like to be tied up that long.

Royalty- there is a statutory lower end for WV. 16% is higher than 12.5% (1/8th). Most of us would rather have the highest royalty we can get.

You are right to be cautious. First drafts of leases are not usually in the mineral owners favor. This is where you need to get informed and you probably do need legal help. First, your wife has to get clear title. Then she can lease. If there is a probate from the ancestor, it may need to be completed or an affidavit of heirship completed. Would suggest that you read the Mineral Help tab above. Also, there is a nice booklet put out by the National Association of Royalty Owners (NARO) “Look before you Lease” by Jim Stafford. Each state has different laws, but that is a good overview. I would also suggest that you contact the NARO Appalachian Chapter and get some guidance from them. www.naro-us.org

The reason that you need good legal help is that you are in a primarily gassy area and the post production charges can eat up all of your royalties if you allow them. You need professional help to get a good lease or your can lose quite a bit of money just from the “wrong words”. Also, the more acreage you have, the more negotiating power you have. Half an acre doesn’t help much, but larger acres give you more leverage.

Read through the posts on the WV topics and they will help you get acclimated. Welcome to the energy business!

[dome]

Welcome. If you know the county in WV where her great-grandmother resided, you might check their website and search under her last name to see if any old lease info comes up. That may help locate the parcel or parcels involved. If you know where the parcels are located, then search the WV DEP site for a map of any drilling activity in the area as a reference.

Under no circumstances agree to a ten-year lease. 5 years max with no automatic extension. As to royalty, ask for 18% or up to 20%. 12.5% is the minimum in WV and unfortunately many settle on that number because they didn’t do their research. As to bonus, I would ask for $4,000-$4,500 per net acre. Your lease will probably be a boilerplate document with several items that you do not agree with. That is where the addendum comes in. Make sure your exceptions to the lease document are noted here. Things like no automatic extension, the agreed royalty %, etc. I posted a sample in an earlier post on the Marshall County, WV section of this site. If you don’t see it, let me know and I can share again. I am not a professional but went through the same process twice regarding interests from my wife’s distant relatives in WV. Do not rush to sign a lease until your terms are met. Good luck.

[dfellows5]

Thanks to both of you for the advice. I am waiting on a phone call this week and will update and post or cross-post to the WV County section when I have some answers to my questions to the landman. Again thanks and as I learn I will definitely pass it on to other new folks on here and elsewhere. Seems like mineral rights information is a subject we have all heard of but most folks have no idea how it works lol.

[dfellows5]

Wow, my brain is about fried from all the reading I have done over the week on mineral rights and leasing. I have read stories of companies taking advantage of owners and such. I did join NARO and did get some info from them, so I am updating my previous post.

Well, we got a generic type lease I guess in Wetzel County, West Virginia: “The land (the “Leased Premises”) leased herein is located in Center District, Wetzel County, West Virginia, including that certain real property described in Deed Book 105, Page 39 and being the tract(s) described in the aforesaid deed containing Fifty-two (52) acres, more or less, and conveyed to Lessor by. The property is described in Deed Book 105, Page 39 and Tax Map 8 Parcels 50, 51 and 59.

Talked them from a 10 year to a 5 year but lease says they can extend another 5 years. I will look at adding in the addendum a clause to the effect of if drilling or something along those lines for an extension.

Due Diligence Period. Lessee shall have 120 business days after Lessor’s execution of this Agreement (the “Diligence Period”) to execute this Agreement. Think we would like to shorten this to 60 or 90 days to get drilling started.

Payments. a. Royalties. The Lessee shall pay monthly to Lessor a royalty of one eighth (1/8th) of the net proceeds realized from the sale of all oil produced and sold from the premises after deducting charges for making it merchantable and transporting the oil to the point of sale, and shall pay monthly to Lessor for all gas produced and sold from the Leased Premises, a royalty equal to one-eighth (1/8th) of the Amount Realized from lease and on and on.

But in the Addendum it states Gas Royalty Payment without Deduction of 18% for natural gas applicable to the first interstate pipeline into which the natural gas is delivered. And we will pay for our share of all severance, ad valorem and other production related taxes charged to or incurred by Lessee on production from leased premises. I thought it should have said from wellhead. Where would the first interstate pipeline be? By using terms first interstate pipeline, not sure if we will be liable for transportation/pre and post production costs? Also does not include any production on possible oil. I know it’s primarily gas in that area but there is some oil and other stuff being produced. Just worried about some of the specific wording.

Also, as far as lease, we stated we may be interested in $1.00 lease for higher royalty consideration which is why the royalty offer went from 14% to 16% to 18% being offered now.

There is a clause for gas storage of $300 per year and some folks say not to let them store gas. Is that because they may just use it as storage and not drill? I welcome any more comments/suggestions you may have. And yes Dome, I found the Addendum you did on another post and will most likely add some of that to my revision. I have PDFs/MS Word of the Lease, Addendum and Order of Payment and would post (if allowed on this site) or email if that would help with the comments.

[M_Barnes]

Just some general comments…

The lease usually states the gross acres, not the net acres, so you may not have as many acres as you think you have.

Many of us would not want the 5 year option to renew at all. If you can only get a lease with a 5 year extension, get more money-more than you are offered now for that second half. It prevents you from negotiating five years from now. They still could tie you up for 10 years with no activity.

If they drill and have production in the first five years, then you are held by the secondary term of the lease (as long as there is economic production) and the five year option may not apply.

I would never allow a 120 business days for due diligence. That is just to check your title (and perhaps to flip your lease) and has nothing to do with drilling. I will only hand over a signed lease for money in the bank. You do not want them holding onto your lease for six months before paying you! I have a third party hold my lease and only turn it over upon payment. You do not want a lease filed and they haven’t paid you. Very hard to get undone.

You have all sorts of post production charges in your Payments.a.royalties paragraph. That can cost you all of your royalties, just saying…

You need an attorney to review the lease because little words like “at the mouth of the well” versus “at the first interstate pipeline” have very large monetary differences of what you will see in your royalty statement. in certain states, “at the well head” is horrible for the mineral owner.

I personally prefer a higher royalty lease. You only get a bonus once, but a higher royalty lease is for one well or multiple wells.

Not a fan of gas storage.