Evaluating recent Converse County, WY lease offer

I have a Mineral Deed in Converse County, Wyoming (Township 32 North, Range 69 West, 6th P.M., Section 21, SE ¼) and I’ve received an oil and gas lease offer for my portion of the mineral rights.

Does anyone have any current information as to how active of an area that is and what current bonus rates and royalty % are for that vicinity?

One thing I’m attempting to do is evaluate the terms of that offer in comparison to the terms I found online that the State of Wyoming received as a result of their auctioning state owned rights for this same 160 acre parcel. (The State’s lease that resulted from this auction is dated 3 months ago, so it’s fairly recent.)

I’m having trouble comparing “apples to apples” when it comes to the lease bonuses. The offer I received shows a dollar figure PER NET MINERAL ACRE. The lease signed between the State of Wyoming and the company that won the state’s auction shows the “Advance Rental” as “$1.00 per acre or fraction thereof”. The “Application for Oil and Gas Lease” submitted by the company who won the auction for this parcel does show the “Advanced Rental: $160.00” ($1.00 x 160 acres) but it also shows an “Additional Bonus” of a figure that equates to their winning “Bid per Acre” x the 160 acres. There appears to be no mention of “Net Mineral Acres” in the State’s lease or on the “State of Wyoming Application for Oil and Gas Lease” form submitted by the winning company. On this “Application”, next to “Legal Description” and “Acres: 160”, it shows “Ownership %: 100.00)

So my additional questions are:

1. Why would the State of Wyoming “Application for Oil and Gas Lease” form show Ownership at 100%? Since I own a portion of the Mineral Rights for this parcel, I know that the State doesn’t own 100% of the Mineral Rights. What does this 100% refer to?

2. Is the State’s bonus structured very differently than the way my bonus would be structured? (It seems the State’s bonus is determined by winning bid per acre x number of actual acres ….. and my bonus is being determined by a proposed $ amount multiplied by my NET Mineral Acres. Would this be correct?)

3. If so, then how does reviewing the State’s lease help me evaluate the fairness of the lease bonus offered to me? Is the only thing that reviewing the State’s lease would help me evaluate be the Royalty % (which appears to be a bit more than the offer to me)?

4. The State’s lease is for a primary term of 5 years. There’s no mention of an optional extension. Would I have any hope of negotiating a better lease term than that? I’d prefer something more like a 3 year primary term, with a 2 year additional option.

5. Generally speaking, is there a minimum number of Net Mineral Acres that you need in order to be considered as having some bargaining power in lease negotiations? Or is the deciding factor the number of actual acres in the parcel and not my Net Mineral acres?

6. The company that submitted a lease proposal to me appears to be a broker. They told me that they are representing a large oil company, which they named. This “broker” is the same company that won the State’s auction and signed the lease with the State that I referred to above. Would it be best if I contact the large oil company named by the broker to see if in fact these two parties are actually working with each other? And, if I know of other companies leasing in the same area, is it acceptable for me to contact them to see if they have an interest in presenting a lease proposal to me? If so, how best to approach that?

7. What’s the name of the oil and gas field in the location of Converse County, Wyoming, Township 32 North, Range 69 West, 6th P.M., Section 21, SE ¼?

Don't follow your township, can't help you there. Yet for general answers;

1. Seems odd. Though the broker calling you indicates they believe you own an interest too (in addition to the State's). If nearby go to Douglas courthouse and confirm your ownership.

2. Yes it's different. State lease is $X bonus amount up front, plus the $1 per year rental. Your lease will be $X bonus up front, PERIOD (or $X with a possible later extension payment if you go that route).

3. Current State lease is perfect starting point for bonus & royalty amounts. Typically State & Fed leases bring higher bonus rates because title is not an issue. So seek same (or better royalty) and perhaps slightly less (or same) bonus payment.

4. You can shoot for a 3 yr term. Though I dislike extension options and if necessary take a flat five year (with higher up front bonus) instead of 3+2.

5. No minimum. Can only say "More is Better" (net & gross). "Net" acres is what you are leasing. The "gross" is the footprint of area involved. If you own half or more (net) you're in control. Yet if the whole area is hot, a small net under a large gross area may provide leverage. Though even ten net acres under 160 gross may give you bargaining power, if they REALLY want it. The key is how anxious they are to lease your minerals.

6. Most oil companies use brokers. You can call their company but it's probably not necessary. Though by all means call every other (competing) oil company which has shown an interest near your area. Always seek counter offers to the one you hold! Competition is your best friend. Good Luck!

Hi,

I'm a landman working a little bit in Converse county and would be happy to share some info with you and answer some questions if i could. Be great to visit a little bit about what's going up there as well. Look forward to hearing back. Best, Will