Lease Negotiations


#1

Can someone please explain why a company enters into negotiations with a mineral owner and then decides to “shut down leasing efforts?” What is the purpose of the exercise? I’ve been negotiating with Native Exploration for 3 months only to get to the point where I’m ready to sign, and then receive an email ending it all. I’m confused.


#2

Peg:

Strange things happen in the oil patch when the price of the product drops 30% in a couple of weeks. Companies in these shale plays depend on revenue to drill the next well & when that is significantly reduced, the first thing to stop is the leasing.


#3

Thanks for the information, Todd. It helps to understand. After all the research I’ve done, I’ll be ready the next time!


#4

Todd’s right, lots of things can lead to this. It may be that the operator has enough acreage signed in the section to pool it and they want to save broker/acquisition costs from obtaining any more acreage, especially if the mineral owners may be attempting to negotiate higher bonuses. It could also be that they had results come in from a test well that they didn’t like and they’re cutting their losses. It could be a hundred other things and a mix of them. Once you’ve determined that you like a particular offer, the sooner it’s executed, the better, so there is a lower likelihood of something unforeseen happening.

Thanks,

Nick Hunley, Attorney, CPL Disclaimer: This post is for information purposes only and is not legal advice.


#5

Where are your minerals located (section, township and range)? My family has minerals in section 30 6N3W, and Native Exploration has an application to drill there but it’s been dragging on with OCC because there’s a couple of protests from other companies. I’m just curious about them as a company and whether your minerals are close to ours.