How do I find out what is are fair terms in a lease offer in Roosevelt County, New Mexico? I have received an offer from Long Leaf Title which seems absurdly low. The rights are in T2S, R33E, NMPM, Section 18. 280 gross and 120 net mineral acres.
Catherine,
I just received a call and an offer from Long Leaf for mineral rights in Roosevelt County, as well. Can you share what you've learned about Long Leaf, what they offered you, and what you have learned about reasonable lease terms?
Others are encouraged to respond, too.
Thanks,
Dean
Absurdly low compared to WHAT? Offers in the next section, the next town, the next county, or what you read in the newspaper or heard on television? Roosevelt County is on the extreme northern edge of the Permian Basin, so I would guess that offers are "low" there in part because the produceable formations tend to thin out there. Also, if the Offeror is interested in developing natural gas, that might also be part of the reason for the "low" offer, because $4/mcf natural gas is not nearly as exciting right now as $110/Bl. crude oil. If there is a way to check for production in the area on the Web site of whatever state agency regulates the oil-and-gas business in New Mexico, do that to gauge what other activity is in the area. If there is not much activity in the vicinity, that could be a third reason that the offer was not as large as you thought it should be.
Pete, I am on both sides in this, sometimes an offer does sound intrinsically low, like $15 per acre 5 years and 15%, which may actually be what people are willing to lease for in the area. My answer would be that they obviously do not have enough money to properly develop my minerals just because it does not meet my minimum standard before I will set my signature to paper or the bonus would not pay my legal expenses so the answer would be no.
I told you about the lawyer I was going to hire who told me he refused to lease his personal minerals in FT Worth for $25,000 per acre and 22.5% royalty in 2008 and I did not hire him to be my lawyer because one would not be all there in my opinion to turn down such an offer.
I worked as a field landman for a very large major, and in some areas they had me offer low bonus amounts because the area was unproven. In one county, no gas well had ever been drilled there, by my client or anybody else, ever, so the bonus offers were very low. So just because the offer is low does not necessarily mean that the Lessee does not have the heft to follow through.
Still not a good reason to sign a lease that the bonus will not even pay for the legal advice you should have in leasing, but someone will sign. People love to sign things. Sorry but I'm not selling 80% of my oil or potential oil or even more than that for a bonus I think low. I would take zero bonus a drilling commitment and 30% though. What could be more fair than that. I'm sharing the risk, I could get nothing. Frankly I'm willing to wait for someone else to be the guinea pig.
R. W., I wasn't saying that she should sign the lease, I don't know all the factors involved and it's not my decision. And my general advice to folks is never to sign the first thing put in front of them. I was simply explaining some reasons why the bonus amount might be what she considers to be low. I'm still waiting to hear "absurdly low" compared to WHAT?
"I'm still waiting to hear "absurdly low" compared to WHAT?"
In reality, compared to doing nothing. I didn't post the original post, and to be fair to the OP, she stated that the offer "seems" absurdly low.
My offer was an upfront "bonus" of $5.00 per acre for 10 years rights. Not $5.00 per year - $5.00 for all ten years. And a royalty of 12.5%. The up-front payment isn't worth me fooling around with it for that amount, but I posted to find out what the going rates are in Roosevelt County. Can anyone post any actual lease terms or offers?
I did some title work there but no leasing so can't be helpful in that regard. Five dollars per acre with 1/8 RI is indeed a complete joke, for any length of Primary Term. Not even worth a return phone call, in my opinion.
I'm saying there should be a threshold below which you should not bind yourself to a contract, only you can decide what that threshold is but it has to be worth going to some trouble because more often than is known, things don't go right. Trust me, you don't want to be the lab rat in the test. The first few wells usually aren't the best. Let them practice on somebody else, they can drill yours when they have it down.
Dean, My offer from Long Leaf matched yours exactly. Obviously, I didn't take it. Thanks for getting in touch.
Catherine