My brother and I each own 25.8 acres in 3 surveys: A-263, A-714 & A-1098. As far as I know, these are non-producing. We have been presented with an offer of $400/acre and 20% royalty for three years. Does anyone know of activity in these areas and if this is a fair offer? Thanks.
Is you offer from Vanna Production? Based on what’s been filed in the Deed Records so far, Vanna has leased 170 acres in the A-263 and 450 acres in a combination of A-262 and A-714.
Vanna Production is leasing in Anderson County for Mitsui. Drake Exploration, believed to be leasing for Expand (Chesapeake), is also leasing in this area. Comstock has leased about 4,400 acres to the west of your locations.
All this leasing is for a deep gas play focusing on the Bossier and Haynesville Formations.
I don’t have any info on bonus amounts, but some mineral owners have been able to get 25% royalties from Vanna. Making sure the royalty is cost-free is also very important, as treatment and transportation costs are very high for this deep gas project.
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As AH has indicated, bonus amounts are not public or recorded anywhere. I would give up some bonus money to get a higher royalty. And a cost-free lease is absolutely what you will want to get - highly recommend that you have a lawyer look over all paperwork before making a decision.
My guess is that they will be willing to go higher than $400/acre bonus but I do not know this area, and I would be firm at 25% royalty. Mr. Harrington is correct. Costs for gathering, compression, and other treatment, plus transportation can be extremely high for gas wells. I would recommend you use an Oil & Gas attorney for this lease. Just saying “no costs” doesn’t work. The issue of post production costs is the subject of much litigation. We have our own lease and our O&G attorney has modified our “No cost” and other revenue provisions periodically to make sure we stay up.
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Consider negoiation on a 4 year term to keep the upfront and royalty high.
I know of a 1200/ac offer with 25% royalty.
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What I think is happening in Anderson, Leon, Houston and other Counties in this natural gas play is that there are brokers, smaller companies, and individuals speculating, trying to lease “cheap” and flip the leases to make a profit and get an over ride at the mineral owners expense. Most all of these people do not have the money to drill a 30 Million Dollar well and get it into production.
It appears that Mitsui and Expand are pulling in more landmen to lease on their behalf in order to get as much acreage leased as quickly as possible since they are competing with each other. A lease offering a 25% royalty is unlikely to be coming from a flipper.
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