I inherited about 2.3 net mineral acres in the K.A. Wellborn Survey A-1099 in Cass county. I received a call and letter from an independent landman regarding interest in leasing it out and I’m wondering about negotiating some of the terms they offered. I have other family members that I am reaching out to as they also all have a few net mineral acres in this tract. They are offering a primary term of 5 years, royalty from production of 1/5 (but after deducting ad valorem, production and excise tax, and any incurred treatment/production/delivery/marketing costs), and a bonus of $250/acre.
A quick search looks like this exact area and a lot of the surround tracts is currently has high oil production activity. I don’t know who the top producers are that are interested in this tract, but I have a list of about 15 different companies that are active in this county. Any thoughts on the initial lease offer? Thanks in advance.
If it were me, I would wait don’t do anything. In a hurry you’ll get other offers. Give Wade Calwell a call he’ll have some better advice. Welcome to Cass County forum.
Lee
In the Southwestern part of Cass County Rose City Resources and Barrow-Shaver Resources are drilling wells into the Cotton Valley Lime formation. These are fairly good wells. Rose City and Barrow -Shaver are both drilling vertical and horizontal wells. You need to find out which company is wanting your acreage…occasionally the horizontal well leases pay a little more than the vertical well leases. I would definitely ask for 25% royalty and I would up the bonus money to $600 and negotiate if need be. With no more acreage than you have it may be hard to change some of the other terms that are listed. Get with the relatives and stick tight with negotiations…Good luck with your lease.
Thank you so much. It looks like there are several active wells nearby (one looks to be just on the other side of county road), all by Rose City Resources in the Hidden Rock (Cotton Valley Lime) field.
One last question, the current lease they are offering has a lot of production and post-production costs that will be taken out before an royalties. From what I’ve read, I should push hard to have a no production/postproduction cost clause in the lease. is this a reasonable request? Thank you all for the very quick and detailed responses!!!
That is a very reasonable request but be careful with the wording that the producer/oil company puts in there as it can nullify what you are asking for. If you are asking for 25% royalty and they agree to that and then they turn around and deduct 12% of your royalty check for operating expenses that doesn’t leave you the mineral owner with much…Your problem is that you don’t have any leverage with so little net mineral acres. Again, good luck with your lease…mailbox money is nice…it’s like Christmas every month
In my experience from the Haynesville Shale in Caddo Parish, with a small tract like you have it may be best to sing the lease and get the bonus money they are offering. I signed for $225/ acre and was pretty mad when it jumped up to $28,000/ acre a few months later. Could have laid my house off. But I’ve been getting about $300/ month for almost 10 years now. If you think of the bonus as a bonus it’s just a little free money. The real money comes in royalties. They dont charge the production cost to the ones who sign the leases. They charge that to the ones who force pool the lease. My children will get a check every month off the royalties when I’m gone. Just make sure you get the 25% and not 20%. Have a lawyer look at it for you if you need clarity.