Lease offer for Section 271 Block 13

I just received a lease offer from Bellomy Exploration to lease a very small interest that I have in Section 271, Block 13 of Reeves County.

Did anyone else get the same or similar offer?

Lease Bonus: $2,000 per net mineral acre (this seems incredibly low) Royalty: 25% Term: 3 Years

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Wait until you can get $12K nma - This section is hot right now. Use an attorney to review any lease you sign. Sharks out there.

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Danna, one thing I would always ask any company who has offered to lease your minerals is: Are you planning on drilling a well? Or are you planning to sell my lease to a company who will drill a well?

I do not find Bellomy Exploration listed as an Operator on the Texas Railroad Commission Website. This tells me they have never filed a drilling permit or operated any existing wells in the State. You will never get your best deal when dealing with a middleman, being a company who is flipping leases for profit. Now there are some major E&P companies who use independent land brokerage firms to acquire leases on their behalf, but most times these brokerage firms will be acquiring these leases in the name of the E&P company as Lessee.

IF you only own a partial interest in a tract of land please be aware that once you have leased to a company who has no plans of drilling it is then up to that company to make a deal with the company who is planning on drilling a well to include your leased interests in their well. If they cannot get the drilling company to accept your lease and if the other company does drill a well on the land in which you own it is possible you will never be paid any royalties from the production from the other companies well. All responsibility to drill you a well is on the Lessee of your lease.

There are protections in place for the accounting of royalties from production and an option to participate in your share of drilling expenses for those who have an unleased interest in a tract of land; But once you sign your mineral rights over to another company in an oil and gas lease this protection is gone.

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If J. Doe and G. Smith each own a one-half undivided interest in 640 acres, and J. Doe leases to Company ABC and G. Smith leases to Company XYZ, what happens to J. Doe’s interest in a well Company XYZ drills and completes after J. Doe’s lease to Company ABC expires?

Brenda Johnson, $12k/NMA is a serious amount. Do you know of any good operators or landmen who can make such serious offers? I’d love to know.

Danna, how did your offer go with Bellomy Exploration? $2k/NMA does seem very low. Did they go up?

I have seen your youtube videos; you seem to have a good feel for things. Do you know of any other operators/brokers looking to lease minerals SE of Toyah? Do you have an idea of what lease rates are going for in the area SE of Toyah, other than $2k/NMA?

Hi Danna we leased this section for 10k pnma, 1/4 royalty, 3 year term with our own lease. This was from Ridgefield in September 2020. An offer of 2k pnma Is laughable for this Section. Hire an attorney to negotiate your lease. We did and it paid off handsomely.

Rick5, That’s a real good number I think. Its good at any time, but especially since they did the deal in a pandemic environment. Good for you.

Did you have any interest from other operators/brokers/landmen?

Hi Tommy Joe…yep…OXY USA wanted to lease for 2500 pnma. Lol. This offer came after we leased to Ridgefield so glad it was a lower #.

Rick, I see. Was this a few months back, that you leased? Did you take the first offer from Ridgefield, or sit on it, or counter? Our lease expired a few months back, but no serious offers yet.

Yes, this can happen and has happened*. Then, after the lease expires, the unleased owner may or may never be given an opportunity by the current operator to sign a lease; and I have seen this play-out with small interests owners who have leased to a lease flipper when their Lessee was being unreasonable in their negotiations with trying to work with the drilling company. And if they do get an opportunity to lease, then there is no need for a Lease Bonus as production is already in place and royalties may only be paid from the date of the lease forward, however most operators would offer a Bonus. Then, if a 2nd well is planned to be drilled, then the unleased owner would need to be contacted again.

*It would be very rare in a 1/2 - 1/2 ownership situation, but I have seen a scenario very similar to this that played-out in Hockley County in the early 1980’s, but the Lessees finally entered into a JOA. However in the meantime they had to get the lessors to ratify each others ogl’s and to acknowledge the production from the wells the 1 operator had drilled would perpetuate both leases.

Danna,

Please see the attached.

According to DrillingInfo (DI), 50 Leases and related instruments have been filed in Reeves County in and around Section 271 in the past year.

I called up the details of most of them to see if any Bonus Amounts were described, but did not find any.

Hope this helps -

[50 AREA LEASES, ETC - MAP & TABLE.pdf|attachment]

(upload://2HBVlkK4Lwq4dszUUSOZH7Tw5jO.pdf) (127.1 KB)

Charles, Does Drillinginfo give bonus pnma? I thought that would be private data between a Lessor and Lessee? But I would love to know what amounts pnma minerals are going for in Block 55 T7.

Hey, Tommy_Joe!

The attached is what I pulled up from DI about Leases, etc. in Reeves County a couple of days ago.

You will have to convert the CSV table and organize it yourself, but it includes a lot of information.

But it will only include Bonus Payment amounts or Bonus Payment Amounts for Extensions if that information was given in the actual documents filed of record.

DI is imperfect, but it is the best source about Bonus Payments of any kind I’ve found so far.

LEASES, ETC 12 MO - MAP.pdf (60.2 KB)

1609620755325.csv (564.5 KB)

Thanks, Charles! For some reason, the map and table didn’t upload. It isn’t a clickable link for me.

Yeah, That’s real good data. As you noted, only some of the cells populate under the column “Bonus” or “Bonus Extension”. It seems like that data is government/state leases. But that is still helpful especially because it gives the bonus on a pnma basis, —and then I just use the TRRC website to locate where in Reeves that associated land is. Thanks.

So I see a lot of $3,500, $8,500 and $10,000 lease numbers Bonus payments, is that pnma? And most of these are in Blk 50 or other areas than 270 or 271?

I notice that for the smaller tracts, say under a 10-20 acres, the bonus is sometime very large. Where as the bigger the tract, the less they pay on a pnma basis. On average, on the whole.

I might be mistake however. Anyone know why?

I’ve seen that sometimes a lessee might want simple a few acres to “peak into” the lease. So to speak; at least that is what I think I read a long time ago once.

You have to really analyze that data before making any generalizations. Keep in mind that all acreage is listed as gross acres, and not net acres. Second, State leases, whether leased through the GLO directly or an RAL tract leased by surface owner as agent for State list bonus and rarely do any other leases. Third, the date of the lease matters due to then-current oil prices and success of surrounding wells. There was surge in lease bonus rates when new companies were being funded by equity groups and trying to block up acreage. Fourth, prices vary widely based on area and geology. Reeves is a huge county and you need to map the leases.

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JedC, Yes, those Bonus Rates are Per Net Mineral Acre. Some of the smaller ones might be for Options to Renew or Extend from several years back.

Tommy_Joe, This area is so valuable I doubt if many companies or individuals are just picking up a few acres here and there. From what I’ve been seeing, everybody is grabbing all the acreage they can get.