Hi folks, I’m new here and I need help with a lease offer I received for mineral rights I own in Erie, CO from Civitas. My understanding is I have four options: sign the lease as it is, negotiate, not sign at all, or find a mineral rights broker to potentially get another offer from another company. This is all new to me and I’m not sure what direction to take. Is it worth it to have an attorney review the lease? If so, what do they charge? Any help would be much appreciated. Thank you.
Howdy, your options are pretty spot on…more specifically three outcomes of lease, participate, or get forced pooled. Fourth outcome, if you will, of divesting the minerals completely; not really recommended if there is drilling coming down the line. As you stated, other companies would be happy to lease or buy it; you don’t necessarily need a broker or attorney imho - there is a wealth of information on this forum regarding what clauses you do/do not want in your lease, could help you keep a few hundred bucks. Participating in the drilling is a great option, assuming it is not a ton of acreage and your upfront capital costs woudn’t be massive. If you don’t sign the lease or participate, they will force pool you, assign you a royalty (usually 16%) and subject you to payout penalties, generally not a good scenario.
hollym: I replied to this question when you asked under a different topic, but for the sake of redundancy, I will post my reply here again.
It is hard to give you advice without knowing what terms have been offered by Civitas. Your bargaining power also varies greatly depending on how many net mineral acres you own.
You should avoid force pooling in Colorado as it rarely works out as well as leasing unless the terms are just lousy. Force pooling is a mechanism whereby minor owners are forced to allow drilling under a set of rules in order not to penalize the majority of owners who have made a deal with the driller. Civitas has drilled many wells so I suspect that their terms are not bad. You also have the option of paying your share of the drilling and completion and having a working interest but these are expensive wells and several will be drilled at once. For example if you had 10 acres in typical 1280 acre unit and they drilled 8 wells at a total cost of $40,000,000; your share of the drilling cost would be over $300,000.