Is it always better to go with a lease agreement? Can anyone tell me the pro’s and con’s of leasing versus force pooling? Thank you in advance.
I am sorry to have to say this but Wyoming almost exclusively favors the oil producer. If you are force pooled you will not recieve any royalty until the well pays off and the risk penalty is paid, which may be as much as 300%. A well may be profitable with everyone but those force pooled enjoying a handsome profit, but the well could run dry before the 300% penalty is paid off. Unless you are in a proven area with monster wells, or are a gambling person who is absolutely sure that there is a huge amount of oil that would pay off the well and penalty and still give you a large return, I’d sign the lease. It pains me to tell you this. I think the state of Wy is very unfair to you. I think at the very least you should seek to add a most favored nations clause to the lease ( I learned of this from a Buddy Cotten blog on this site, you should look at it ), I would want it to apply to royalty, bonus and payment of fees. You would be entitled to the best terms that anyone else signed for. I think it is a reasonable thing to add to the lease and if the producer does not agree, it may allow you to fight the monstrously sized risk penalty. I wish I had more palatable advice to give you. My best wishes go with you.
You may have other options depending on the state of the process Gary Hutchinson
We are in the beginning phase, barely received an offer, but they have staked the well site. It is on another property, but my family holds 80 of the 160 acres they are drilling. We are all in agreement about what we want, but want to make sure we get what we deserve. We are in Wyoming. What other options might there be?
Gary L. Hutchinson said:
You may have other options depending on the state of the process
By the way, thank you both for your advice and answering me.
You are welcome. I hope Mr. hutchinson will reply again with a viable option. He is a professional. I would be happy to be wrong this time. I’m fairly sure that you couldn’t stop the drilling through court action. The other party/s have the right to produce their minerals and yours will be produced at the same time. The right to produce takes precedence. I think in other states they would need consent from a majority of the ownership or even 60%, but I saw no indication, that in Wy they need anything more than 1 mineral owner that wants to produce. In other states if you are non-consent you get a cost free royalty of 12.5% to 16% or more from the beginning and lasting until the well and penalty are paid off. In N.D. I will receive 16% royalty beginning with the first barrel and the risk penalty is only 50%. Landmen in N.D. have tried to scare me with the you get nothing speach, but in Wy it’s not a scare tactic.