I’ve recently received two similar offers for my minerals rights in Custer County, Section 2, Township 12N, Range 14W. I’ve received minimal payments for that lease, less than $200 in 5 years, now I’m being offered over $10,000 for my mineral rights. What are the advantages and disadvantages of selling? Would there be an option for a better lease instead?
Validus has applied to drill several horizontal wells there. That is why you are getting offers. The advantage of selling is that you get money now. The disadvantage is that you probably walk away from decades of royalties that would have made your more. Most buyers intend to make a profit off their purchases. If you are already held by the shallow production and you do not have a depth clause in the lease, then you are bound by that lease. Looks like you have two wells coming and maybe someday a third between that other set of two. Thousands of feet of perforations on a horizontal well for many years is quite a bit better than just a few tens of feet of perforations from the earlier wells.
Thank you, Martha, this was extremely helpful. In a situation like this, is there any chance of getting a new lease? I also heard from someone else that it would depend on a “depth clause” in our lease. My dad and his sister signed the lease in 1988 if that’s helpful. The only clause I found about depth stated that any pipes had to be buried below plow depth. I can share the lease if that would be helpful.
Most older leases did not have a depth clause, so you may be still leased from the grass roots to the center of the earth as long as there is production under the terms of the first lease.
Depending upon how many net mineral acres you own, you may make much more than $10,000 on the royalties from the thousands of feet of perforations in the new wells. (or not)
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