Hello, i was needing any advice and insight for a lease offer from RedSky Land using Continental?regarding Section 15-01N-02W per the lease, is there currently production in that area? Also, what are your thoughts about five year vs 3 year, that is our 2 options? offering either $1,200 / w 3/16th on the 5 year or $750 / w 1/5th royalty on the 3 year? Any and all thoughts and insights are appreciated as i have never had an offer and know only what i’ve read online on the companies.
Continental is putting together a big horizontal Woodford play in that area. Red Sky is leasing for them. Personally, I prefer a three year lease (or less) with no two year option. The offer is less than what they are currently leasing for. You will need to negotiate better terms on the clauses in the lease or you will have hefty post production costs taken out of your royalty check.
Thank you so much for the info M_Barnes. I will keep you posted and sure to have more questions.
Ok, we will go with the 3 year. This is the intro offer and I assume with the actual lease documents to review and sign for execution is what i need to examine. can you explain which clauses in the lease i should specifically look for to help reduce or eliminate the post production cost?
Ask them to send you a copy of their draft lease and their Exhibit A. You are looking for the royalty clause which is on the first page near the first third of the lease and you may also see it in the Exhibit A. The Exhibit A will need some negotiation.