If anyone learns anything from this forum, please get professional assistance when leasing your land. The cost will be negligible to the harm you can do yourself by not being represented by a competent mineral manager and/or oil and gas attorney. An oil and gas lease is not a do-it-yourself project. The oil companies know they can't pull the wool over the eyes of your mineral manager and/or oil and gas attorney and will treat them differently than they will treat you. Just my two cents worth after having been involved in expensive lawsuits.
6th Generation Texan,
Thanks for the advice.
Clint Liles
I totally agree with this recommendation as well.
I have jumped on lease offers many times when others held back trying to do negotiations and or hiring oil & gas attorney's, many of those I was the only one to receive a lease bonus. I'm setting here with a stack of cash and the minerals are now back open for lease while the others are mad at the lessors, angry at themselves and have nothing to show financially from their minerals for that period of time. I have also spoke with individuals who had minor stakes in a tract (2 net mineral acres) that where told to hire an experienced oil & gas attorney and they paid him more than they will ever make. There are occasions when it might be best to not do more than ask for help in places like this forum as long as the advice given is not a one sided, self-opinionated belief like never sell, never use a draft, always hire an experienced oil & gas attorney. Never and always are not always the best decision to make. I am in no way stating anyone here is one sided, self-opinionated or incorrect, at least not anymore than I myself am.
MJ,
I will give you that there are times when it might be appropriate to learn without a financial investment (i.e. attorney or mineral manager), but those times are rare and I would say they only exist when you can "sheep" into a group movement. I don't even necessarily mean a formal LO/MO group, but just what the people in the area are accepting and what steps they or someone in that group has taken. If you don't have the financial means or the "justification" isn't there (i.e. 2 acres and you can get $300 signing bonus or maybe $3,000 wait and if lucky) then I'd try to shirttail behind someone who had a vested interest in getting the best deal they could and were willing to share what they knew/learned.
But generally, and this is why it is done, landman quietly go around and "chat" with owners and essentially set up a handshake deal that is followed by some document to make it official (yes, the lease). You have been very fortunate and I have seen your posts, you know your stuff. It sounds like you have learned through interest and experience and not mistakes and problems. So now you can share with others on boards like this and thus the value of boards like this.
Me on the other hand, I learned the hard way and was taken advantage of, along with 1000+ others. What happened to me in MI is happening in ND, CO and will happen elsewhere. I admittedly tend to be one sided because I error on the side of caution. When I give advice (present my opinion) I attempt to do so in a way that alerts MOs to what could occur (it might not, as you have experienced), but it could and in the leasing climate today there are people that have unfortunately gotten burned.
Now when to lease? it is like playing poker. You do your best to figure out the other players hand and eventually you have to show your hand (sign or not). Now do you sign the first week or wait, that is a personal thing. Like with poker you might lose and miss out on the leasing action. I leased for $900/ac thinking I did pretty good, leasing had started under $100, but after me leases went as high as $3,000. Whatever a person agrees to accept it is best to no longer look back or second guess the decision. Just hope that drilling will occur and royalties are a possibility. Who gets royalties is a small share of people that lease and depending on other factors as well a sign bonus can be important to people; but how long do you hold out? that is a personal thing.
Now why legal? The average MO/Lessor don't have any experience leasing minerals or even reviewing contracts. The atmosphere during the leasing "gold rush" is exciting and the landman make it seem casual and friendly, yet rushed. Next thing you know you have a lease? Legal counsel can take the lead to ensure that you secure a balanced lease and have the appropriate protections. People must keep in mind that with a producing lease the "deal" can be in the family for generations.
Anyway, it is up to each person how to handle a leasing opportunity; I suppose no one can dictate how it MUST proceed. I want to share with people my thoughts on making a deal more secure; taking out as much of the risk - is it necessary, sometimes, but that is the problem, you never know when it is necessary to take precautions until you've been bit.
Regarding bank drafts, if this method is used, it provides a Lessee an opportunity to hold your minerals and decide at a later date if they are truly interested. So how to combat that is to accept a different and essentially immediate payment method. In the good old days a draft was the rule, it may still be prevalent, but there are more risks now then in the past since now a deal isn't necessarily a deal. hmmmm.....
Hard to argue with that I think, but hey, what we do, how we handle our leasing affairs is our business...or choice and I'm not arguing with you MJ - we just have differing opinions.
Wilson
I helped a lot of people in MI on their leasing before Chesapeake moved in and I know they and others have burned mineral owners everywhere. My comments where because I see post saying always do this and never do that like it's an absolute in every given situation, but it is not and can not always be so simple of a decision. Every situation demands it's own proper attention, not a generalization. On leasing, besides seeing many get left out I have seen many get force pooled solely because they hired an attorney and had demands that the lessee would not meet. Even though you may think the minerals and possibly the surface are yours to decide what you want and can do what you want, make the decisions all yourself, the fact is no matter what it is in life it can and sometimes is left up to others to make the decision for you. Have you ever been force pooled or had an Eminent domain action against you. Sometimes in life one has no choice, kind of like taxes and what they do with your tax money. Using an intermediary is the only method to handle transactions where there is no trust, for most will not send an executed lease or deed without payment and most will not send payment without an executed lease or deed and really, is it even fair to ask one to trust if you have no trust yourself. Would you as a lessee pay employees to verify title on someone who is not committed to a lease, sounds like you could lose a lot of money in a competitive environment like takes place in all major plays. Opinions help change and better (usually) the world in which we live but no one solution fits all scenarios, even though many tend to think so.