I have been contacted by an oil driling co and told I am the heir to mineral rights to land in Eddy county NM in Section 2, Township 19S, Range 25E that they want to drill on. I have been offered $1750 per acre (13) and a 25% royalty. I know almost nothing about this business and am seeking advice and a possible recommendation for representation from experienced/knowledgable persons.
Vernon:
I know nothing about Eddy County NM but you should also post this under "County Groups" where you will find Eddy County listed under New Mexico. This site has 5 members and maybe one of them can adivise you regarding your matter. From the terms you have been offered, this area must be getting active. I will say that the 25% royalty is a very good offer. If you will click on "Groups" above and follow the screens to County Groups then to New Mexico, you will find Eddy County.
There are a number of oil and gas attorneys in Midland TX who are licensed in NM as well as Texas. A lot of the landmen doing NM acquisitions, as well as attorneys doing title work and operating agreements and so on for NM, are in Midland TX. You can use findlaw.com to search attorneys, by the way. The trick will be to find an attorney who has time to help you and who does not have conflict of interest with your lessee, i.e. the company offering to lease your interited mineral interests.
Welcome to the forum, and good luck.
(I had a great attorney in Roswell NM helping me for many years on miscellaneous oil and gas matters, but he moved to Texas to work in-house for one of the major oil companies; otherwise, i would recommend him to you.)
You can go on the NM state website and look at offerings and minimum bids, and results with winning bids, and see if you can find tracts near you. As a private owner, and because you are leasing for 3 years (don't lease for longer) and getting 25%, you probably should not expect a bonus as high as the State of NM gets, but reviewing the state leases will give you an idea of whether you are in a highly desirable spot or not. Try to get maybe 1/3 maybe even 1/2 as much as State bonus if there was a recent lease on something very very close to you. http://www.nmstatelands.org/Lease_Sale_Notices_1.aspx
You probably already know this: You own 13 nma's under how many gross? If for example your 13 nma's are under 160 gross, you own 16.25% in that tract. On the other hand, if your 13 nma's are under the whole section, your interest is only approx 2%. If your lessee is focused on just that quarter section, your 16.25% is more significant than if he is leasing the entire section. I am never sure exactly how it affects my bargaining power: If I am negotiating for a tract where I own only 2 or 3 nma's, maybe I can command a higher bonus because it's not that costly to the lessee to pay more per nma's on so few nma's, but on the other hand I don't have much bargaining power when I own such a tiny sliver of the mineral interests.
I have no knowledge of New Mexico oil/ gas.. But if someone is offering you $1750 and 25% I would guess they see oil coming out of the ground.. This is a terrific offer... So good I believe you need a qualified attorney to help you. It will cost you something and don't let the attorney screw it up.. Just be sure you can get what they are offering in a timely manner.. Don't get greedy.. This is like finding money and if they are this certain the royalty is where the serious money will be made.
Darrell may be right, but I am not sure I agree. Some of the state leases in Lea County where I own are selling for well over $5000, and I am hearing from some knowledgeable advisors that private parties should expect to get half or more of what the state leases are going for, if on adjacent tracts, despite the difference in years and royalty percentage. I have an offer that recently came in where I own a few nma's very very close to one of the high-bonus State leases, so I will be putting the advice to the test in coming weeks or months. I have a lease offer in Texas where the bonus is now a LOT higher than what it was when the offer first came in (many months ago). If you go through those NM State offering sheets that show minimum bids, and the results sheets, it will be tedious work but if you find tracts that are close to where you own, you could earn yourself a lot of money for the time you spend combing the lists of tracts. I have seen many cases where some people take the bonus and form that are first offered, but the more knowledgeable mineral owners hold out, negotiate from a better knowledge base, and get a better lease form, higher royalty (but almost never higher than 25%), and higher bonus. By the way, see if you can find out how to look up the federal BLM (Bureau of Land Management) leases too. If you don't have the time or inclination to fool with it, find an attorney or landman who either subscribes to DrillingInfo.com or can do the lookups for you on the govt websites.
How did the lease offer(and the property itself) work out for you Vernon? I'm in a similar situation; my grandmother left me 5.333 acres when she passed in 2005. I've only collected lease fees three times of about $1625 for 2 years leasing time for the pat 7 yrs or so, for all 5.333 acres, so the offer you received was definitely a good one, and the drilling company must've figured they had a good shot at finding oil/minerals/gas. How did it work out for you? Are you in Beverly Hills now like Jed Clampett? LOL Let me know! ~Nick