I own an undivided 16.000 acre mineral interest in this section Sect. 22-09N-04W , when it was leased for the first time 07/2017 my check was for $42,500.00, so about $2,600.00 per acre? Now I just got an offer to lease it for $450.00 per acre with 12.5% royalty in event of production for 3 years + 2 year option to renew! That seems way too low. But like you say they may have gone down I was just wondering if you had any idea?
There was quite a flurry of activity planned in that section in 2019-20 with Roan and then EOG, but everything slowed down during Covid. In general, lease bonus amounts are down this year. Personally, I do not like to lease at 1/8th (12.5%). I always ask for the upper royalty amounts. Even if the bonus is zero. I also do not take a 3 +2 option. Too much can happen in five years as we have just seen. EOG had a permit, but it expired in May of 2020 when most everything was halted. Time will tell. Good time to review your lease with an attorney and be ready to have more favorable clauses with a better offer.
1 Like
You might wait a bit also and see if more offers come in. Was it the same outfit trying to lease it? There are a bunch of sharks that will just try to flip the lease for more money or royalty.
1 Like
Oh my gosh! Thank you Martha & Joe! That’s kinda what I was thinking. That’s too much of a difference though, so Joe you might be right on that one. And Martha you make some valid points! Level-headedness is not my strong suit hahaha. So I really appreciate both of you again thanks!
1 Like
I worked that McClain area quite a bit back in 2017/2018. I would agree with everyone that it definitely seems low for only a 1/8th royalty. From their perspective, they are taking a chance that it will actually get developed during the lease term. Hot and heavy area 3 years ago but has struggled to gain that momentum back yet, especially after EOG pulled out of 9N-4W. In saying all that, I think you have room to negotiate a higher bonus amount per acre on that particular royalty.
How can you ask for the upper royalty?
I always ask what they are offering for the 3/16ths, 1/5th and 1/4th options. Sometimes, they have authority to go higher and sometimes, they do not.
I have mineral interests in McClain County that I leased 4 years ago at $4000 NMA for a 3/16th. This year that same interest was pooled at $400 NMA 3/16th. Times have definitely changed.
Lease bonus prices are ALL about competition.
1 Like
This topic was automatically closed after 90 days. New replies are no longer allowed.