We received a lease for land we have partical ownership of near Dagmar, the lease was sent in 11/2010. However part of the family decided to wait for a better offer the lease terms were as follows: $100.00 per net mineral acre,( I got them to go to $140.00), for 5 years,16 2/3% royalty, $3.00 per acre rental. Plus there was a sign on bonus. Was this good deal or not???
Colleen:
Could you be more specific about the location of your minerals....State/Field/Township/Range/Section, etc. Unable to answer the question regarding the bonus but the 5 years is too long for any lease, 3 years at max. The royalty figure is questionable depending on where your minerals are located. If your minerals are in the vicinity of current oil and gas developements, this will have a major impact on both the bonus and the % royalty. What is the $3.00/acre rental all about?
Most leases now days are "Paid Up" i.e. rental included with bonus. If they're not Paid Up, there is a rental amount per acre paid on the 2nd, 3rd, 4th and 5th years of the lease unless production is found. If the Lessee fails to pay the annual rental (assuming no production has been found) the lease terminates.
Don't know what percentage of leases are paid up versus ones with delay rentals, but I certainly prefer our leases to have delay rentals built into them. I agree that a 3 year primary term is best with no extensions. The royalty sounds way too low, and $3.00 delay rental also sounds low, but I don't know your state or county.