Let me start by saying… I know somewhere between very little and nothing about mineral royalties, etc. I have been an investor in real estate and owned an ad agency and other things over the years.
With that said, I have for many years owned and have the deed to 10 acres mineral and mineral royalties in Dimmit County, Texas.
It has been drilled on before but nothing came of it. I was pretty much convinced after some research, around 1994, that it was pretty much worth less and filed it away.
I recently have received an offer, and after a few days of research on the Texas RR site and others, I think it is because of new technology that this 10 acres may have some value.
It is obvious that there is a lot of activity in the area.
I took the offer to my attorney the day I received it, but have not heard back yet. So in the meantime I’m just trying to find out what I can. I also sent it to a high school friend that is in the oil business in Texas but have not heard back from him either.
Without going over the paid-up oil and gas lease they sent which is long and nothing like real estate leases that I’m knowledgeable about, but just by giving the info generally I’m wondering if anything can be known.
The offer is:
500.00 per net mineral acre for primary and 250. per net mineral acre for option
Term is 3 years with a 2 year option paid up
Royalty 20%
Or bonus 250. primary and 250. per net for the option
Royalty of 22.5 percent
Thanks for anything you can tell me with this little bit of info.
Dear Mr. Sheffler,
Several things immediately come to mind.
First, you say that you have 10 mineral acres. Is that under 10 surface acres, or an undivided interest in a larger tract? The difference in negotiating power is amazing.
Location of your acreage is everything. For all we know, a well is permitted already on the tract under which you own an interest. Knowing the abstract number will allow you to research the new permits and/or completions at the Railroad Commission website (that is the regulatory body for oil and gas in Texas).
The royalty amount is modest. Try to negotiate nothing less than 22.5% royalty. Preferably 25%. Always cost free. Do not accept their language on cost free. They will kill you with it.
I prefer not to grant options. The truth of the matter is that the net effect is that you are granting a 5 year lease with one rental payment. 5 years is too long. If they will not go for a three year term, ask for all the money up front for a 4 year lease.
Definitely get a lessor friendly lease form. Do not, under any normal circumstances, accept the form which they proffered.
If you own the surface as well, you must have strict surface provisions included in the form. Industry and the environment can peacefully co-exist. It is just better when there is a contract in place to ensure that is the case.
Make sure that your attorney is very familiar with oil and gas law.
If they have not disclosed the client, find out who will be the Operator. You want a good Operator with a history of success and one who has the resources to develop the acreage.
Best,
Thanks so much. What I have does not include surface rights. It is, and I don’t think it is a great position, but better than nothing.
It is an undivided one-fourth of all our mineral and mineral royalty interest in and to all that certain forty acres of land more or less, and then gives the survey info. I know the last lease referred to it as 10 acres along with the survey info.
The area is just north of Asherton, not even halfway to Carrizo Springs. I have been to the Railroad Commission website and the GIS locator, I think they called it, and looked up production logs in the area and permits and so on. It appears to be an active area now; there is a producing well nearby.
Years ago there was a well drilled there, maybe two, but it was around 1990 or before, and nothing happened from that.
I also looked up the land company and the company they represent. I see their name on wells in that area often. Thanks again Dan.
Can I ask what your involvement is in the oil business?
Dear Mr. Sheffer,
Mr. Cotton has just given you an abbreviated session on Mineral Management 101.
BTW - if your attorney is not specialized in O&G, don’t waste your time. Hire a specialist.
BTW2 - mineral rights ownership “trumps” surface rights ownership.
BTW3 - post your survey’s legal description
Good luck,
Pat
Did you see my response to Mr. Cotton?
I was not sure if it is a good idea to put your survey’s legal on here or not???
What is the upside of doing that and what is the downside.
Thanks for your help, Dan
Go to FORUMS at the top and click on it, then click on COUNTY and scroll down to Dimmitt County to see a “feed” trail from other postings.
Also click on MINERAL HELP. Hopefully, you will get better acquainted with what types of information this Forum, its members, and other surface/mineral owners can offer. And, to think, it’s all free.
Good luck,
Pat
The lease they sent is… Producers 88[4-89] - paid up with 640 acres pooling provision.
Thanks again, Dan
Dear Mr. Sheffer,
According to your lead-in sentence “let me start by saying … I know somewhere between, very little and nothing about mineral royalty’s etc.,” and by reading your previous posts, it is my opinion that this is a good enough reason why it would be in your best behalf to seek the advice of a Mineral Manager expert who is capable of reviewing your lease and can negotiate the terms, which should serve to protect your interests.
Good luck,
Pat
Dear Mr. Sheffer,
My profile at Mineral Rights Forum is located here:
http://www.mineralrightsforum.com/profile/BuddyCotten
That gives you an overview of my curriculum vitae.
Best wishes,
Would you have any idea approximately what percentage they were paying and how much they were paying per acre, to do paid-up leases in the 2006 to 2008 date range in Dimmit County?