Gas Lease

My mineral lease expires January 29, 2011, the gas company has the option to extend for an additional 2 years at just over $19,000 per acre, I have just over 1 acre. The Lessee has approached myself and the other households in my neighborhood to reduce this payment to $5,250 per acre and extend for 9 months instead of two years. I was wondering if anyone else has had the same discussion with their gas company and what our right would be if we did'nt accept their offer. I am woried if I agree to this change, the gas company may approach us again in the future for more changes.

Dear Mr Koch,

This is a perfect reason why you should never agree to an option, unless it is part of an overall land strategy. In this case, the oil company locked themselves in to a payment and now they want to re-trade it.

What if you received an offer for $30K per acre 2 months ago that you had to let go because of this clause and now you will have nothing if you do not accept their offer. Bad situation.

Now that you are in this mess, I can suggest that if you want to lease your land for that amount, it will be on a new lease form, with more favorable terms. Do not give up something without receiving something in return. Negotiations, 101.

Thank you Mr. Cotten,

The only good news to our sittuation is they are only restating the paragraph for the extension period and not the future royalty payments should they begin drilling in the next nine months.

Buddy Cotten said:

Dear Mr Koch,

This is a perfect reason why you should never agree to an option, unless it is part of an overall land strategy. In this case, the oil company locked themselves in to a payment and now they want to re-trade it.

What if you received an offer for $30K per acre 2 months ago that you had to let go because of this clause and now you will have nothing if you do not accept their offer. Bad situation.

Now that you are in this mess, I can suggest that if you want to lease your land for that amount, it will be on a new lease form, with more favorable terms. Do not give up something without receiving something in return. Negotiations, 101.

Good luck,

Buddy Cotten

www.cottenoilproperties.com

Give and Take. Perhaps there is some negotiating power on your side to barter for increased royalty percentage if you do agree to allow for their proposed reduction in the bonus/acre fee.

If you can get an improved royalty (and other clauses/terms) in your revised contract then it might be worth it in the long run.