Does anybody know what the going rate is for leasing in this area. I was made an offer that is much lower than offers I have received in other areas in North Dakota lately.
Our family only owns 20 acres total so we don't have much bargaining power.
Ms. Watters, if the offer is not worth your time and effort, tell them so. Leasing is binding yourself to a contract and you should have legal assistance and if what they offer does not pay handsomely beyond covering your legal fees, why would you consider it ? The lease generally offers no protection to the lessor, I know you can insist on favorable clauses for yourself but if the operator does not live up to it, what will you do ? If it wasn't enough money to begin with, how much money will you spend if the operator/lessee shortchanges you or does not pay at all ?
Ms. Watters, in the spacing just west of you is a what I would call a decent well, 68,358 barrels of oil in a year and a current production of 3,526 in june without even having a pump yet isn't a barn burner by any means, but it looks like it's going to make money. It's your oil, your money. Right now you are in negotiations to see how much of your money you are going to keep. If your interest is small, then it won't hurt their bottom line much to let you keep a little of it. If you deal with a landman, remember that he has no authority to negotiate outside the range that his employers gave him. If you wanted 1% more royalty and it would be a done deal, the operator might go for that but the landman is going to say no. I also want you to know that between oil companies, that they assign leases to each other for cash and retain an override royalty interest. The override I have seen most commonly is 23%. I would bend my efforts to getting a competing offer, operators don't like that because if someone else leases you and participates the operator makes nothing off your acres, and that's the whole point. The operator doesn't want someone else to participate for a cheaper well in a proven area, they want the money from draining your acres. I have also told operators that if someone will beat their offer by $1 that that is who I would lease to. I'm not saying to ask for the moon, but I think a 20% royalty would be reasonable. Just think , God forbid, that it was a dry well, 20% of nothing is nothing. Only if the well makes money does it matter a great deal what your royalty is. Your 20 acres could produce more than $500,000 over then next 30 years. Will you accept 16.67% ($83,350), 18% ($90,000) or 20% ($100,000) of that, and remember the operator can pocket 2.5 to 3.5 times that much or more after paying for the well and operating costs? If you can find someone else who wants to invest and make money, your little 20 acres may become more important to the operator. Think it over and good luck.
Thank you very much for your information. The offer was from a landman with Springfield Oil I think he said and they were working for Samson. I tried calling Samson today but did not get anyone. I guess I will wait until I hear from them.