My 85-year-old mother has been approached to extend her five year lease for one year with an offer of $500/acre (she has 20 acres) and 3/16 royalty. The location is:
Township 153 North, Range 100 West, 5th P.M.
Section 20: SE4SE
Section 28: SW4NW4, NW4SW4
Section 29: NE4
Is this a reasonable offer? If not, what would be a reasonable offer?
Thanks
Joe
Joe:
The royalty end of the extension sounds ok but I believe the bonus/acre is less than what it should be for this area of ND. I would ask at least $200 more per acre on the bonus end. You might want to ask more than that just to find out what the company is willing to pay.
Joe, nobody can tell you if that is a good offer or not without looking at your lease in it’s entirety. I have mentioned to you before about charges in your other thread. If you are paying charges for seperating, marketing, filtering and compressing gas, along with trucking oil, your 3/16, 18.75% royalty would be in my opinion a pretty poor deal. Look at the charges in your lease. Charges could make your 3/16 royalty = to a 15.5% cost free royalty or less. To me reasonable might be 3/16 with no charges and with well crafted horizontal and verticle pugh clauses. Have your trusted oil and gas professional look it over and possibly add the pugh clauses himself. This is what I would be asking if I were doing it myself and wanted a lease, with minimal professional help. If you have more than 20 or 30 net acres involved in this lease, I think you would be crazy not to get professional help with leasing.
Thank you for helpful advice - I have just requested a copy of the original lease, which my mother can't find ... I'll be sure and find out about the charges.
JS
r w kennedy said:
Joe, nobody can tell you if that is a good offer or not without looking at your lease in it's entirety. I have mentioned to you before about charges in your other thread. If you are paying charges for seperating, marketing, filtering and compressing gas, along with trucking oil, your 3/16, 18.75% royalty would be in my opinion a pretty poor deal. Look at the charges in your lease. Charges could make your 3/16 royalty = to a 15.5% cost free royalty or less. To me reasonable might be 3/16 with no charges and with well crafted horizontal and verticle pugh clauses. Have your trusted oil and gas professional look it over and possibly add the pugh clauses himself. This is what I would be asking if I were doing it myself and wanted a lease, with minimal professional help. If you have more than 20 or 30 net acres involved in this lease, I think you would be crazy not to get professional help with leasing.
Will do!
JS
charles s mallory said:
Joe:
The royalty end of the extension sounds ok but I believe the bonus/acre is less than what it should be for this area of ND. I would ask at least $200 more per acre on the bonus end. You might want to ask more than that just to find out what the company is willing to pay.
Joe;
The going rate for a signing bonus is significantly higher than $500.00 per acre. We have property within a couple of miles of yours and signed for more than four times that amount and 1/5th just weeks ago.
Thanks this is helpful information. Was yours a lease or lease extension? If lease extension, was it for one year or multiple years ... how many? A couple more things - was it with Oasis Petroleum or another company? Did you negotiate with a third party or directly with the company. I am trying to learn about this stuff ~
JS
Roger D. Spears said:
Joe;
The going rate for a signing bonus is significantly higher than $500.00 per acre. We have property within a couple of miles of yours and signed for more than four times that amount and 1/5th just weeks ago.
Joe;
Ours was a three year lease and it was not with Oasis. We obtained a local Williston law firm to finalize the lease. We started the negotiations ourselves but had planned all along to bring in professional help. I strongly recommend professional assistance. There is a lot more in these oil leases than meets the eye. Good luck with the process. It can be very fascinating and quite a learning experience.
Joe Schmuck said:
Thanks this is helpful information. Was yours a lease or lease extension? If lease extension, was it for one year or multiple years ... how many? A couple more things - was it with Oasis Petroleum or another company? Did you negotiate with a third party or directly with the company. I am trying to learn about this stuff ~
JS
Roger D. Spears said:Joe;
The going rate for a signing bonus is significantly higher than $500.00 per acre. We have property within a couple of miles of yours and signed for more than four times that amount and 1/5th just weeks ago.