My neighborhood (comprises a section) is negotiating with several companies as a group. The people that have been heading up that effort now want all of us to sign an agreement hiring a landman to further negotiate the price, and then to negotiate the lease and surface agreement. I think the terms are outrageous. He wants 25% on any additonal compensation he is able to attain for us, or $3000 if he can’t improve the final offer. Keep in mind, that would be $16,000 if he gets it $100 higher (which we could more than likely do on our own). My thoughts are that we’ve done a pretty good job of playing the companies off of each other, as the initial offer was $300 and 12.5%, and now we’re likely at $800 to $850 and 20%. Then, when nobody will go higher, then I’d say it would be time to hire an attorney. Isn’t an attorney almost going to be cheaper? Why go with a landman if you don’t save money? Not to mention, doesn’t an attorney afford more protection? His career could be on the line if his actions are unethical, and he would have malpractice insurance. Any thoughts?
Dear Lisa,
I agree with everything that you have said. Apparently, I do not charge enough!
Thanks Buddy, hearing that from a landman helps a lot!
Buddy Cotten said:
Dear Lisa,
I agree with everything that you have said. Apparently, I do not charge enough!
Best,
Buddy Cotten
www.cottenoilproperties.com
You raise a great point:
Why pay someone who knows a specialized area to do for you what they know how to do? And should that be a landman or an attorney?
Out front, I’ll tell you that a good landman may know more about the minutiae of hydrogeology and markets of the day than a good attorney – at that moment. But the landman tends to have a vested interest.
Then the attorney is more likely to be hired to be on your side, and if s/he’s worth their salt, can come up to speed – if you’re willing to make it worth their while. And they have a better handle on the law/lease terms.
So who do you hire? You hire the better person with your best interests in mind. It’’s a case-by-case decision.
You have sketched out a great dilemma:
The mineral owners want someone to go to bat for them but don’t want to pay for their knowledge and expertise. No one wants to pay anyone to argue for the rights they should have in the first place. But that’s the way of the world.
However, in this imperfect world, as the Rolling Stones say, “We all need someone to lean on, and if you need someone, you can lean on me.”
Those with actual knowledge and expertise are more likely to get offers from the “big oil” players who stand against the “little oil” players who actually own the oil and gas that the “big oil” players want and need to play the “big oil” game.
So how on earth are the “little oil” players who actually own the oil and gas supposed to contend with the “big oil” players who pay their landmen and lawyers at $250 – 450/hour?
How do you compete with that?
To be candid, you can’t get it for free.
But if the players work together, they can set up an arrangement where they can get the representation they need at a net deal after the fact that leaves them ahead.
Mike Elliott melliott@elliott-legal.com
A neighborhood group can get together and invite all interested landmen/oil companies to submit their best offer (either in writing or in a presentation). My neighbors and I did this several years ago. Then we hired an attorney to review the contract we accepted. There are considerations other than lease price and royalty amounts. I don’t know if all neighbors signed it but it didn’t matter. You don’t need either a landman or an attorney to solicit offers from multiple companies.
In our case, we marketed our 424 acres through a local minerals placement firm with a lease which we had approved ahead of time. Standard boilerplate leases even with addendums are not enough. A good oil and gas attorney is essential. Marketing your own lease turns the tables 180 degrees in your favor.
MH Bowers said:
A neighborhood group can get together and invite all interested landmen/oil companies to submit their best offer (either in writing or in a presentation). My neighbors and I did this several years ago. Then we hired an attorney to review the contract we accepted. There are considerations other than lease price and royalty amounts. I don’t know if all neighbors signed it but it didn’t matter. You don’t need either a landman or an attorney to solicit offers from multiple companies.
landman work for the company at hand for the lease, thier best intrest is in favor of Oil and Gas Company not yours. An Attorney would be working only in your best intrest and not the Oil and Gas Companys. You need to protect your rights and surface. Once you sign with nothing else but a boilerplate lease the Oil and Gas Company can do any thing they want and you are at thier mercey as you watch your land be destoryed. Also depending on where your land is makes a big differents in the bouns money but even not knowing where you land is 800 or 850 is a low ball figure when others in Pa. W.Va. in the Marcellus Shale are getting from 1000 to 5000 per acre and 18.5%
Agreed Terrel, but I actually should have stated independent landman.
Terrell Wood said:
landman work for the company at hand for the lease, thier best intrest is in favor of Oil and Gas Company not yours. An Attorney would be working only in your best intrest and not the Oil and Gas Companys.
As a neighborhood, we have gone ahead and hired an independent landman to further market our minerals and to negotiate the contracts, and then we are having an oil and gas attorney review the contracts to make sure they are sound before signing.
Dear Lisa
There are advantages to both, the landman is boots on the ground, the lawyer is boots in the legal questions and technical parts of thecontract. A combiantion of both is probaly the best each have their own place and reasons for being there. Lokk at the value added for each part not the 00.00 price. The may blind you to the true value .
Thank
Charles Murphy
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