Bud, I have a lease with SWN north of you in Marshall Co. I would counter with a 5 yr term absolutely no auto extension, $4,000 - $4,500 per net acre which would yield $1,142 - $1,285 based on your net acres. Also a minimum of 18% royalty. Attached is an example of an Addendum to a lease that may be helpful. Perhaps one of the professionals will have additional advice. Best of luck.
Sample Addendum
Should there be any inconsistency between the terms and conditions set forth in the main body of this Lease and the terms and conditions specified in this Addendum, the provisions of the Addendum shall prevail and supersede the inconsistent provisions in the main body ofthis Lease.
ROYALTY: All references made in Paragraph (B) of the section entitled "PAYMENT TO LESSOR’ as to one-eighth (1/8) royalty shall be amended to EIGHTEEN Percent (187o).
ROYALTIES WITHOUT DEDUCTION: All royalties due hereunder shall be based upon the gross proceeds received by Lessee for all oil, gas, and the constituents thereofproduced and sold from the Lease, without deduction, directly or indirectly, for the cost ofproducing, gathering, separating, treating, dehydrating, compressing. processing. transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form. The royalty paid hereunder shall be subject to a deduction for its proportionate share ofany production tax and/or severance tax.
NO STORAGE RIGHTS: Notwithstanding anything herein contained to the contrary, Lessee agrees the herein described leased premises shall not be used for the purpose of gas storage as defined by the Federal Energy Regulatory Commission. Any reference to gas storage contained in this lease is hereby deleted. lf Lessor wishes to enter into an agreement regarding gas storage using the leased premises with a third party, Lessor shall first give Lessee written notice of the identity of the third par1y, the price or the consideration for which the third party is prepared to offer, the effective date and closing date of the transaction and any other inforrnation respecting the transaction which Lessee believes would be material to the exercise of the offering. Lessor does hereby grant Lessee the first option and right to purchase the gas storage rights by matching and tendering to the Lessor any third party’s offering within 30 days of receipt of notice from Lessor.
NO COALBED METHANE: Not withstanding anything contained herein, this Lease shall not include the right to produce coalbed methane.
COMPLIANCE: Lessee’s operations on said land shall comply with all applicable federal and state regulations.
HOLD HARMLESS: Lessee agrees it will protect and save and keep Lessor harmless and indemnified against and from any penalty or damage or charges imposed for any violation of any laws or ordinances, whether occasioned by the neglect of Lessee or those holding under Lessee, and Lessee will at all times protect, indemnify and save and keep harmless the Lessor against and from any and all loss, damage or expense, including any injury to any person or property whomsoever or whatsoever arising out ofor caused by any negligence ofthe Lessee or those holding under Lessee.
WARRANTY OF TITLE: lt is understood that Lessor warrants title to said property only with respect that the title is good to the best of Lessor’s knowledge and Lessee agrees that no claims will be made against Lessor pertaining to warranty of title.
AD VALOREM: Lessee agrees to pay a proportionate share of any increase in ad valorem taxes assessed against the leased premises, which is based upon the value of oil and gas production from, or reserves under, the leased premises.
SHUT-IN LIMITATIONS: Lessee agrees that the shut-in royalty payment will be $25.00 per net mineral acre, per year. Notwithstanding anything to the contrary herein, it is understood and agreed that this lease may not be maintained in force for any one continuous period oftime longerthan five (5) consecutive years afterthe expiration ofthe primary term hereofsolely by the provisions ofthe shut-in royalty clause.
EXTENSION OF PRIMARY TERM: The paragraph contained in the Lease, to which this addendum is attached, providing for an extension of the primary term for one additional term of five (5 ) years from the expiration of the primary term by payment of an amount equal to the initial consideration, is deleted in its entirety.