200 acres total being the east 200 acres of the north 400 acres of section 15 block C33 PSL survey. $500/acre 25% royalty 3 years with option for 3 more years. Im a newbie to this and this forum. What do you guys think of this offer. Thanks
Skip the option - unless you get paid again
Why is the “option” generally considered a poor choice? Just wondering.
You are essentially giving 6 year lease for one bonus money.
Many would argue that an option is a win only situation for the lessee. If the oil play/prospect is successful, the lessee can elect to extend the lease at a much lower cost than if it were attempting to buy into a hot area. If the play/prospect is a dud, then the lessee has no obligation to extend. As others have mentioned, make sure your lease forces a second bonus payment equal to the original if the lessee extends the lease. I believe most leases have three year primary terms and that the options tend to have lengths of two years. I saw that Prestige Exploration Inc. has recorded a number of Gaines county leases in Blk C33, including section 15. You might contact some of the other lessors and try to learn what they received as to bonuses, lease language, etc. The lease you will be asked to sign will most likely be very favorable to the oil company. If you hire an oil and gas attorney, you could win valuable concessions, or the opportunity to lease might come and go while you are haggling about lease language. Your level of risk tolerance will help instruct your next steps. Have your minerals ever been leased?
In my experience with options to extend, you are paid the same bonus twice. Once for the first three years and another exact same bonus for the extension which I thought was typically two years.
If you need a good attorney I would recommend Patrick Flueckiger of Austin.
From my experience, attorneys typically don’t agree to extensions. They will however get you a much better bonus rate than 500 an acre. 25% Royalty is good however. That is fair.
Thank you for your response.
So 500/acre is low? This is Prestige that is offering. And no have never leased these rights before. GIS shows a few dryholes in the vicinity. Oil wells 2.5 miles to the north. And some gas 2.5 miles to the south
Im new to this oil lease business so thanks in advance for your patience. How would find and contact other leasors of this section? So do you believe 500/acre is low? This is Prestige that is offering. He expressed fear of block busting and wouldn’t reveal his client. And no have never leased these rights before. GIS shows a few dryholes in the vicinity. Oil wells 2.5 miles to the north. And some gas 2.5 miles to the south. Any help is greatly appericated. Also i shot a note to the Austin Attorney on his website havent heard back yet.
PS 200 acres is a lot of minerals and it would behoove you to have an attorney help you with the lease. Please see the Oxy Leasing In Gaines County thread.
@dgmartin2002 Go to courthousedirect.com and search Prestige Exploration as Lessee. Then look down the list of those who leased to Prestige. You could purchase some of the recorded documents for addresses and search the individuals on the internet and see if you could get any useful information. I mention Prestige, because I believe it has leased in your section. [What is the name of the company with which you are dealing?] . My opinion is that you may have a hard time getting more than $500-$600/nma bonus. I believe Devon leased thousands of acres to Ring Energy a few years ago for around $500/acre. If you own the surface and the minerals, you are in a better position. If you own the surface, I would definitely recommend having an oil and gas attorney look over the proposed lease. Don’t want to give away water, surface location, disposal well, etc.
I only have a 50 acre share of the 200.
It is Prestige that im dealing with. And was thinking all along that it was an ok offer due to lack of activity around it.
I concur with AJ11 on using courthouse direct for research. There is a fee for using it however.
In my experience, 50 net mineral acres is a lot of acreage. Typically, an offer on the lease bonus, and extension are negotiable. In the past the dry holes may have been vertical wells. Nowadays, our wells have all been horizontal wells drilled.
That is not true. I was paid the same bonus money for the two year option as I was paid for the first three years of the lease. I was paid BOTH times —same amt for 2 yrs as for three years.
How did you find out the oil company was picking up the option to continue? My first three years is up today. Now I’m wondering if I need to call or just let it be till someone wants to lease again.
I simply received a check in the mail–no contact. They did not have to have my permission–that was in my 3/2 contract. If it were me, I would call. If they have produced oil on your lease, the lease is still in force. If they did not, they will have to pay you for the additional two years.
Thank you for your input
I am curious because our lease expired in March and I contacted J Cleo and they told me they were not renewing the lease. I really would like to lease it out again, but do not have any offers