Lease Questions from a Newbie

Oil and Gas Leasing Help
#1

Having inherited mineral rights and being executrix of an estate that requires a lot of research, as a newbie, I am hoping this forum will help me wade through a mess.

Current Situation with a BP lease in Upshur County (Texas):

I have a lease to sign on 81 some odd acres. My percent is tiny...ie 0.28375166. The stated royalty is 1/5 and, of course the bonus payment is small given my ownership percentage.

Along with my brother we are the last owners to be signed. I feel the lease is in order and that I probably have very little negotiating wiggle room at this point. I am inclined to sign.

However, I have a brother I am trying to work with amicably in closing the estate. He recently went to work as a landman for a company that draws up leases for Chesapeake (mainly Texas properties, I think). He only has experiences with the way his company does business and says they ALWAYS allow a mineral rights owner to have a Market Enhancement Clause put in Exhibit A if they ask. (I have read that sometimes there is other language in the lease that effectively takes the teeth out of the clause which may be why they always are agreeable.) The landman says BP is not going to do that or make any major changes on our lease since there are so many others who have already signed. Is this a truthful statement, do you think?

Is it possible that the manner in which Dales draws up agreements for Chesapeake and the way BP is handling its Texas leases are like comparing apples and oranges and never the twain will meet? Also, is it okay that BP will pretty much tie up the entire 81 acres for the three year period?

My inclination is to sign. There most likely will be some fairly good production. If we had a larger percentage and were earlier in the game, I would be applying some of the negotiating tips I have recently learned about on this site. Right now I need to be and sound semi-informed to all parties...the landman and my borther. Please help! Sorta desperate!

#2

With all due respect, oil companies love people who listen to this kind of logic and who are too eager to sign. My advice is to listen to your landman brother. First of all, your percentage is not tiny, and the bonus is paid on a per acre basis, and has little to do with your ownership percentage anyway. Being the last one to sign can be a real advantage. They want you to think there is no wiggle room, or that somehow you are going to be left behind. Hold your ground, and negotiate for what is important to you - ESPECIALLY a market enhancement clause. Decide what you want, and be firm.

#3


JW Anderson said:
With all due respect, oil companies love people who listen to this kind of logic and who are too eager to sign. My advice is to listen to your landman brother. First of all, your percentage is not tiny, and the bonus is paid on a per acre basis, and has little to do with your ownership percentage anyway. Being the last one to sign can be a real advantage. They want you to think there is no wiggle room, or that somehow you are going to be left behind. Hold your ground, and negotiate for what is important to you - ESPECIALLY a market enhancement clause. Decide what you want, and be firm.
Thank you JW. For anyone interested or with knowledge about this area it is an oil and gas lease covering 81.721 acres of land in the Meredith Chandler Survey, in Upshur County. I read that it is possible for me to find out what others were offered and signed for. Is that true?
#4

Yes. The best way to do this on this site is to go to the LISTINGS section at the bottom of the home page. Add your listing there, with all of your details. Good luck.

Nena Norwood said:



JW Anderson said:
With all due respect, oil companies love people who listen to this kind of logic and who are too eager to sign. My advice is to listen to your landman brother. First of all, your percentage is not tiny, and the bonus is paid on a per acre basis, and has little to do with your ownership percentage anyway. Being the last one to sign can be a real advantage. They want you to think there is no wiggle room, or that somehow you are going to be left behind. Hold your ground, and negotiate for what is important to you - ESPECIALLY a market enhancement clause. Decide what you want, and be firm.
Thank you JW. For anyone interested or with knowledge about this area it is an oil and gas lease covering 81.721 acres of land in the Meredith Chandler Survey, in Upshur County. I read that it is possible for me to find out what others were offered and signed for. Is that true?
#5

Nena -

I am a Landman with more than 30 years of experience in negotiating leases.

Upload a copy of your lease and a copy of the "Marketing Enhancement Clause" your brother the Landman is talking about.

You can do that by scanning them in (pdf's work well) and then attaching them to a reply to this entry.

Your brother and the other responders may misunderstand the true purpose of the "Marketing Enhancement Clause". If it is what I suspect it is, you want to stay away from it like it was yesterday's diaper.

And you are correct, there are several ways that a phrase here or a word there can effectively nullify the intent of your added provisions. For example, wherever you find the phrase "Notwithstanding anything herein to the contrary..." DELETE IT. And when they try to re-insert it, DELETE IT AGAIN.

Your "Market Enhancement Clause" is probably a way around any "Free Royalty" clause(s) you might have added or even around the original provision(s) in the lease regarding royalty payments:

They're trying to saddle you with transportation and all kinds of treatment charges, which can cut substantially into your royalty payments. Royalty is SUPPOSED to be free of all costs. That's why it's called ROYALTY.

Didn't your family have an Oil and Gas Attorney review the lease?

Charles Emery Tooke III

Certified Professional Landman

Fort Worth, Texas

#6