Help With a Mineral Rights Lease Offer

Hello everyone. Greetings from the suburbs of Philadelphia, where I came across this forum and need your help to determine if a mineral lease proposal from BP America is something I should sign off on.

I recently inherited 25 acres in Nacogdoches County, Texas. I am being approached by a Petroleum Landman whose client, BP America, wishes to lease certain mineral interest on the land I own. BP is acquiring acreage to drill and not to barter to a third party. I have absolutely no knowledge of this issue and am turning to you guys as the experts to help me through this if you wish to respond. Thank you in advance.

The proposal is as follows, as far as I can tell in reading the proposed lease:

  • Offer of a bonus amount equal to $350 per net mineral acre for a three year paid up primary term with a two year option at the same price.

  • Offer of a royalty burden of 1/5ths.

The landman's cover letter indicates the client might be willing to negotiate.

The questions I have (and I am sure there are other questions I should ask but am not sure as I am a neophyte on this issue) are as follows:

  • Is this a fair offer?

  • Should I consider negotiating on the per acre amount or on the 1/5ths in royalties?

  • Is it worth it to get an attorney to review the lease, or not economically feasible given the potential totality of the offer?

  • Is there a website or a place I can call that can tell me about the credibility of the landman who is making this proposal?

  • Does the fact that BP, a well known company is the client make this deal more reputable or enhances the possible ultimate payout?

  • I have no idea where this land is- are there any resources that I can use to pinpoint exactly where the land is?

  • As to the 1/5ths royalty offer, is it assumed BP would be paying all of the drilling expenses to get the oil or gas out?

  • How would the royalty offer calculated?

  • Is there anything else in the lease I need to get feedback on?

I really appreciate any responses to these questions. Thanks again.


Bruce, I do not have information about lease terms in your specific area.

I will say I have minerals/royalties in multiple counties in 6 states and I will never lease for more than 3 years. The 2 year option is essentially a 5 year lease. When I've had companies be insistent about the option, I have offered them rights of first refusal - if I have another offer to continue the lease past 3 years, I will give them a chance to meet or beat it.

Also, the royalty percentage is more important to me than the bonus therefore I always start out asking for 1/4 royalty that is free of all costs. Free of all costs is VERY important. You will have to pay taxes. I'm referring to costs to operate and/or market and/or treat and/or transport the oil or gas.

There are other important clauses than I am not able to go into on this board. Some clauses depend on the wording of the company's lease form. Leasing is negotiation, and the first offer is very rarely the highest.

Best of Luck!

Ann Whitchurch

Thanks Ann for the feedback. Very useful


Hi Bruce,

I am a mineral owner in Reeves County Texas. I have lease on this property with the organization that is actually productively drilling in the general area. When I learned that I had inherited this property, I did not know what to do, where to turn, etc. I received letters from landman groups, individuals and oil companies requesting to lease or buy my property. I was a bit overwhelmed to say the least, so I decided to do a great deal of homework and educate myself about the mineral rights wheeling and dealings. Let me just say, that is exactly what it is - wheeling and dealing. Many will take advantage of an owner's ignorance.

So, I suggest to learn how to use the Texas Railroad Commission web site. This is a place, once you lean how to navigate it, can provide a world of information about what is going on with minerals in Texas. There are tutorials to teach you on its site and I find that the employees there are helpful with question answering via emails.

Other sources are the companies that are actually drilling and producing in the area where your property is. I found out what company is actually drilling and producing in the area where my minerals are and called them directly. Turns out I was on their list to contact and were glad I had found them first. This company has my lease and they offered me more than 3x what you have been offered to lease per mineral acre. There are many variables to what is a fair market value on your property. Phone calls, research and conversations with people in the business will educate about this. Initially, I was offered only 1/10 from a "wolf" landman to lease my property that I ended up leasing for the actual drilling company.

Attorneys. Before hiring an attorney, please do all the homework and research you can. A reputable oil company with employed landmen (salaried) have as much knowledge about the industry and contracts for leasing as attorneys do. My experience and I have direct experience with this because I spoke with more than one and almost signed up with one has shown me that I made the wisest decision to trust my own research to avoid the expense of hiring an attorney. The ones who did on the section where my property is have yet to sign a lease and have paid out thousands to the attorney only to learn they will not get more for the lease than was initially offered.

Hope all this helps. Bottom line - do not sell! Keep what you own and research, research. Knowledge is power an in this case protects your interests in the best way for you.