Lea County Lease

I have an three-year lease which includes interests in Section 1, Section 12, and Section 13, which expires on January 1, 2017. A landman representing the leasing company has contacted me about my interest in taking the two-year extension provided in the contract. He has said that little activity has been happening in Lea County in the three years of the lease. He seemed to indicate that they did not have a strong interest in exercising the extension and wanted to get my thoughts on it.

The extension provides for $200 per acre bonus, with 3/16ths royalty. Can anyone provide me with some information to assist me in making the decision whether to extend for the two years or let the lease terminate. I am under the impression that is the best deal that I would get. I am aware that there have been richer leasing contracts there, but not sure what the market is these days. So, would it be to my advantage to request the extension at contract terms. I do not live in the area, so I am not familiar with the environment in the county these days.

Look at your lease. Options to extend are exercisable solely at the discretion of the lessee. These companies are not going to consult you. Was your lease assigned to another company? Maybe the landman is trying to find out if the current lessee is going to exercise the option or trying to talk you into a new lease at low terms. New Mexico has gotten very hot in leasing activity. You should research to see what is going on around your minerals. Per one site, 1,930 well permits have been filed since Jan. 1, 2014. Are there permits close by? The BLM live auction sale in September 2016 had bonus rates in Lea County ranging from $200 to $35,500. There have been several other public lease sales since then, one by State of NM. Look for 1/4 royalty. A lot depends on exact location, including Township and Range. You can find this information on public websites. Be patient. Other companies do not know your lease is expiring.

I agree with TennisDaze. Check your lease for the extension option.


Carl, what is the township / range where your lease is located?

Township 15-Range 35-E

N/S of Section 1. the W/2 & W/2E/2 of Section 12. The N/W/4 & S/2 of Section 13.

Township 15-S, Range 36-E

The E/100 of the S/2 of Section 29.

It looks like you're in the Northwest Shelf area. I just searched drilling permits in any section in T15S R35E and T15S R36E, and there appear to have been no drilling permits filed in the last year. Sorry I don't have better news!

Thanks. I had done some research myself and arrived at the same conclusion. However, there is good news. I have successfully negotiated a new deal with the landman that will increase my bonus. Still 3/16ths, though. Would not budge there.

Congrats on the new lease! Collecting a lease bonus every three years like clockwork isn't such a bad deal, either!