My sibling and I own mineral interests in Lea County, New Mexico (Permian Basin). We were contacted by Matador (operator) who offered 1/5 (20%) royalty terms. Also, they seem resistant to our request to add horizontal and vertical Pugh Clauses to the lease.
My question is twofold: 1) Is 20% a fair royalty for the region (I have heard that 25% has been more typical in Lea County for the Permian Basin)? and 2) What is the best way to proceed where the other party is declining a reasonable lease provision, like Pugh Clauses? We have considered indicating that we could pursue a working interest, but this is not a first choice for us because of the risk.
Thank you for any thoughts for neophytes to mineral interest management and this forum.
David
I have within the last week executed all necessary documents to finalize a lease to MRC Permian for a $3000/nma bonus and 1/4 royalty on S17 T25S R36E using a lease I first put together for Amerdev, a producer recently purchased by MRC. MRC insisted that I accept their 3 year term with an option to extend for 2 more years at the same rate. I don’t like to give an extension but everything else was ok including a Pugh Clause. My primary problem with MRC is that it took their new, very inexperienced legal staff 4 months to finally have all the t’s crossed and the i’s dotted to have their final bonus checks in hand. Other than that, I just have to wait to see what the future brings. MRC is investing a lot of money in infrastructure and there is known and good production in the area. I can only hope they know how to find and produce it! ADS
Thank you, Archie. I appreciate your quick response. I am considering hiring an attorney to review the lease proposal in Lea County. Can you recommend one?
Blessings,
David
I have used Eric Camp for work in TX. you can reach him through this forum. I did not need his assistance for my negotiation with MRC in NM