Huerfano County, Colorado oil & gas discussion group. Share your experience regarding lease bonus, royalty rates, drilling activity, and oil & gas news.
I told the landman I wasn’t interested in signing a 5 year lease with a 5 year option. So far I haven’t heard back from him. I would be interested in leasing for a shorter term. Are 5 year leases standard for Colorado?
Dear Jeanne,
If your land is close to Shell’s target area, you have considerable flexibility in granting a lease. You must make sure it will be good for both parties, i.e., collect a reasonable bonus for taking your minerals off the market.
Five-year leases in frontier areas are reasonable and common. It is harder to anticipate what the extension price should be for five more years. I advise my clients to get better lease terms regarding royalty protection for longer-term leases. Of course, if you have more acreage, you have more negotiating strength.