Robertson County -received lease offer . What does 1/5 Royalty on Production mean? I have 3.2104115 net mineral acres on 77.05 gross acres. The offer is $500 per net acre. What does that add up to? What am I getting and what am I giving up? Is this a good offer?
The royalty is the percentage that you receive from the sales of the oil and gas. So 1/5th is a 20% royalty on your 3+ acres. The operator keeps 80% because they take the risk of drilling and operating the well(s). If you have never leased before, you need to get a good oil and gas attorney to review the draft lease. Most folks in TX would only take 25%. The draft lease is not usually in your favor and you need significant edits to get it to the point of being a “good offer”. The decisions you make now can affect you and your family for decades, so investment in legal advice early is important. The attorney can often negotiate for a better bonus as well.