Hello from the frozen north.(-18) My family inherited some mineral rights in Utah from our long gone grand folks. We have a fraction of 40 acres mineral rights only. There is a one year old producing well on said property which started like an enraged moose and declined to almost 1/100th of flow. API no. 43-013-51054. Newfield claims to want to drill more wells.
We received a lease offer from Newfield production co offering 1/6 and they get to use all oil or gas on premises free. Is it a bad idea to use a more friendly owners form from Texas and change state to Utah and make it more favorable to us? Is it normal to ask more than you would settle for (5/16) so there is bargaining room? Does our family have a strong enough position to even bother negotiating? Am I wrong in presuming we get royalty payment for pre lease product produced? Thanks and best regards! Rod
The well you are in is awesome. I believe it has paid out and maybe more. It has declined but not as much as you think it has for such a new well. It makes more water than oil from the Wasatch FM. but the gas is increasing. Newfield, a strong operator, has permitted, is drilling, or is producing everywhere around your acreage. The surrounding wells are not as good yet but they are newer. Another formation, up hole is also productive in the area. You may have found a bird's nest on the ground. And yes, if you don't have a lease in place, you have some great bargaining power but you should know what the lease means as much as what the words say.
You and Jan (below) have many good options depending on the size of your net mineral acres, strength of title, , Utah regs, and discretionary cash. Get some help. Your upside may be 2-4+ times the leasing option.
I didn't get your comment about Texas to Utah but think you may be looking at pennies and ignoring dollars in this instance.
I think a lease form is a lease form, I have not seen any that are state specific, ie have a state name in them other than the property description. Use whatever form you like or have a lawyer make your own or add an appendix to any to modify.
I would listen carefully to Mr. Hutchinson. Leasing may not be your best option.
what are these options you mention but don't explain, You say get help, I thought that is why they asked questions here, you mean pay someone? Elaborate on your comment about looking at pennies and ignoring dollars so we all know what you mean and helps us all out.
Rod, Seldom will an operator go for using any lease other than their own, you can try but I imagine there is no way they'll go for it. You can however normally get them to strike parts of theirs, change the royalty and add clauses. Sometimes they are more willing to negotiate better terms for you since you have such a small interest but one should always try to get the best terms they are willing to give no matter how small or large the interest is. As for your question about pre-leased product produced, if I understand your question correctly the answer would be yes, if no one has been paid for that interest already.
I think Mr. Hutchinson was pretty clear. My understanding from Mr. Hutchinson's post was that the well was very good, had either paid out or soon would and that leasing may not be the best option. I can think of several options,
#1 sell to someone who wants a working interest in this well for as much as you would receive in royalty long term, retaining mineral rights to any future wells. Wouldn't it be nice to not have to wait 15 to 20 years to get the money equivalent to a lease?
#2 bite the bullet and become a working interest. I would consider 20% of what my working interest paid "pocket money" and bank or invest in something safe that would let you acess the money without a large penalty with 30-45 days notice, the rest not needed for operating costs.
#3 possibly you could make a farm out deal so you would have a professional to look out for your interest while they are protecting their own
The operator wants you to think that oil and gas is cut and dried, you lease to them or they take it and you get nothing but I think there is more out there if you look, and yes I would pay someone to help me with this, even if it were to tell me that I could not possibly find such a deal because it shouldn't cost much in that event.
To me an offer of 1/6th on a paid out or nearly paid out well would be an insult. I would be seeking to lease to anyone other than the operator who made that offer. I would not allow the operator to match any other offer I found, they would have to substantially beat any other offer, if in the case I could do nothing but lease. Yes I know that the operator would be grinding their teeth so see their work go for naught and some other lessee get a free ride but it's not my fault they didn't offer 22-25% in an extremely low to no risk situation, the cheap charlies.
I am very happy and thrilled you understood r w, but pretty clear to Rod and others who read it that obviously have no or little experience? I think you are very mistaken and if it was so clear why do you take the time to spell it out or repeat what he so clearly wrote. I think if Rod was so experienced they wouldn't have questions to begin with or they would have just done what they were told here, to pay someone for help they came here for. It is clear why one writes such yet adds that they are for hire. I think you read between the lines and with your experience understood but out of place thinking everyone understood or this site wouldn't exist.
Joe, I'm happy that you are happy. The reason that I explained a few of the things I presume that Mr. Hutchinson was talking about is because, as I posted, most people don't know that there are options other than leasing. I don't hold it against Mr. Hutchinson that he doesn't give away his entire stock and trade as I believe that he gave much analysis/information pertinent to the situation and informed Jan/ Rod that they have a stronger than usual bargaining position if they wished to go ahead and lease. In my opinion, Mr Hutchinson did help and asked nothing in return. There was no talk of friend request or exchange of contact information.
I will hazard a guess that just enough information was given to make one start searching for alternatives, if one was inclined, because if you don't have enough motivation to do some research, you are probably better off just accepting whatever the operator offers.
If you are willing to do some reasearch and you find something that makes you think you could be better off doing something other than leasing, you might want to consult with an oil and gas professional.
Joe, I started learning something about oil and gas from even less of a hint. I too once thought that leasing was all there was.
Joe, I am not making a personal attack here but I would ask you to consider whether Mr. Hutchinson gave information of any value? Consider if that then obligates him to give away his entire stock and trade? Consider that he did not say contact me.
I am just asking if you would entertain the thougts, feel free to kick them out after the party is over.