I received an offer to lease my share of a property in Lea County NM. Can anyone explain to me what the terms mean, and how I can determine if it's a fair offer?
As interesting (but maybe irrelevant) backstory - before I got the letter I did not realize that I owned anything in NM. I (and several cousins) inherited some active leases in Texas from a great-aunt ~5 years ago, and apparently (I'm guessing) these non-active properties in NM were also part of her estate and that the paperwork was lost when her husband died 20+ years prior.
80 Gross Acres, 4.44 Net Mineral Acres
Township 9 S, Range 34 East, NMPM Section 11: N/2NE/4
1. 5 year primary term
2. $250 per net mineral acre bonus
3. 3/16 Royalty to be paid on production of Oil and Gas
Questions:
1. How do I evaluate if the offer is fair or not?
2. what do the terms of the offer mean?
3. if ownership is split between several parties, do we all have to agree to lease before they can pursue this?
4. What is typical lead time between an offer like this and actually drilling and begining production?
5. Why now? Assuming my uncle bought these rights 25+ years ago, why the sudden interest? Particularly when prices are still pretty low.
Congratulations on the discovery! I’m certainty not an expert in New Mexico, but here are a few quick answers to some of your questions:
Asking around is the best way to find out going rates. I’ll see if any of my contacts think that’s a fair deal. New Mexico allows force pooling so the operators have a lot more leverage there with mineral owners than in Texas.
Based on your statement, you own an undivided interest (4.44 acres) in an 80 acre parcel. This means you don’t own any specific part of the land (you can’t go “fence off” your part) but rather a percentage of the property as a whole. I can’t tell if you own the 4.44 acres yourself or if that is split among you and your cousins. The bonus is a one-time payment ($250 x 4.44= $1,110.00). They will control the rights to drill for 5 years (and as long as production continues, if they make a producing well). If they find oil, you will get a part of the profits (3/16 x 4.44/the unit size x your percentage of the 4.44 acres) from its sale.
No. They can force pool and can also carry unleased interests.
There is no way to know for sure. You can check to see if there are any hearings scheduled and permits issued.
New companies look at new areas all the time. New technology and strategies push development in new areas.
I’ll direct message you to give you my contact info. I’m happy to help out! Again, congratulations!
I don't have any property too close, but I do in south Lea Co. Looking at where you are on the NM OCD Map I don't see much activity in the area.
The bonus amount is what will typically vary the most in offers, not sure what is fair in your area, but for the royalty I'd ask for 25% and not accept less than 22.5%, for the term I'd ask for 3yr, no option to renew, or at the very least 3yr and option to renew for 2yr with another bonus paid (same as what is paid for 3yr term). The initial offers are always lower than what they are willing to pay. I would ask for $600+ and possibly then be able to negotiate to something in the $400-$500 range.
I'm no expert, but from the dozen or so leases I have done, this is the approach I would take.
Also, as Jimmy mentioned you can check for any new permits in the area at NM OCD Permits