Leasing agreement protocol

Good Morning I have posted here before but I am unable to find my original post/questions. I have a lease offer from Dudley Land Company on section 16-3S-12E (SW/4) 20 acres 3 year 1/8 $2,000.00 signing bonus. After my initial post. I contacted the landman And asked for 3/16 royalty or keep the original 1/8 but remove the post production clause There has been no response. I cracked the “look before you lease” book and read that I should strike out the terms I am negotiating and write what I want. Did I read that right? I have a feeling that the company is just going to wait us out. She was not very optimistic about my proposal and commented that the company was not making any changes to the terms for any of the other 18 people in our section. She said most of them have reluctantly signed on with the original terms… Thank you so much for any insight.

I see no leases in 16-3S-12E since 2014. The last one was at 3/16ths. There are no pending OCC cases, no drilling, etc. I think you will have to wait this one out. If others have signed leases, my subscription source does not have them posted as filed. Do I have the correct section?

You’re not being unreasonable in saying you want a 3/16 (18.75%) royalty in the lease. The landman and the company she is working for know that. Matter of fact, most mineral owners would cringe if you told them you’d signed a lease at 1/8 (12.50%) royalty. If they really want the lease they’ll give you 3/16.

You’d also not be unreasonable in asking that post-production costs not be allowed. Getting post-production costs deleted from the lease could be a deal buster. Depends on the area and the type of oil that’s being pulled up.

Ask the landman who Dudley will be assigning the lease to. Is it a company with a good reputation?

You should be very, very wary of anyone contacting you and saying they’re not amenable to making any changes in their lease form. That almost always translates into a not-good agreement for the mineral owner. There is always room for negotiation. If you’re being told there isn’t, then this is a classical example of when it’s time to politely reply that you’re not interested in the terms they’re offering and wishing them a good day.

following up on Martha’s post. Did you receive this proposal recently?

Hi Tim Yes we received the offer about a month ago

I find it interesting that the landman said the other 18 people signed, yet the leases have not been filed-at least in my first source. I see one memo of lease in another source and a whole lot of mineral buying.

Thank you for looking into it. It all sounds so sketchy. I think we will follow your advice and sit this one out. I am curious to know if you do consulting on a professional basis.

Well I am shocked to say that the landman contacted me and indicated she had been given certain provisions she can now work with Depth clause Shut- in clause Pugh clause And market enhancement clause The only one I can make some kind of sense out of is the Market enhancement clause No production cost but enhancement for sale cost would be deducted. The theory being enhancements=higher profit? Still at 1/8th royalty. Sounds like the shut in clause has us 3 consecutive years after expiration of primary term. I cannot thank all of you who responded to my initial posts enough. I would not have tried to negotiate without your encouragement! Still don’t know what I am doing and not sure if any of this is much but it made me feel good to get a response! Thank you

I do not like a three year shut in clause. I only allow one. I would only allow the market enhancement clause if it was tied directly to the terms on the Mittelstat case, otherwise it has too many holes in it that are usually in the operator’s favor. And usually, I say no post production charges allowed at all.

Vipshe, we have also been contacted by The Dudley Land Company as to wanting to take over the Lease our father signed back in 2005. He passed away 6 years ago and always regretted the lease he signed. We had it transferred into our names and have not paid any attention to it until now. The current contract also has the 3 year consecutive “shut-in” clause that we found unrealistic and it was on a 1/8th royalty. James has offered us a “shut-in revision clause” stating: “notwithstanding anything to the contrary herein, it is understood and agreed that this lease may not be maintained in force for more than 3 consecutive years after the expiration of the primary term or any extension thereof solely by the provisions of the shut-in royalty clause.” AS Stated from James to me that this was how they were going to help us terminate the existing lease in court (they take all the costs) as in a “3 year consecutive shut-in clause” means a non-producing well and we should not be tied to this clause. ALTHOUGH the 1st paragraph states it will be a term of 3 years for so long as there is production. (HE was supposed to change that to 1 year and didn’t). JUST FYI to this information.
We (me and my 3 sisters) are new to this and I just found this forum today (YEA) and have read everything and followed a lot of links and definitions to try and become more “versed” and knowledgeable since we now hold the mineral rights. We are on Section 3-3S-12E. I have a few other questions but will ask in a separate forum.

Any wording which as “enchancement of sale costs” needs to be specifically defined and limited in the lease terms. Otherwise the operator can claim any array of costs have “enhanced” the production and can be charged. Maybe preproduction costs, siuch as the pumper, could be charged or the salaries of the accounting and marketing employees.

Be sure to set a cumulative limit on shut-in’s, such as no more than one year at a time and no more than two years cumulative. You do not want as elk to be shut-in over and over.

I didn’t see anything in the contract about “enhancements of sale costs”. I’ll reread again as I have almost memorized it after today!

I have a couple of other questions please, if anyone can help me. Is it “good” if their wording in the contract when written "Pooled therewith, as in said land or lands pooled therewith? Also, (I’ve been reading up on all the links), when the workding states: "To deliver to the credit of Lessor free of cost, in the pipeline to which it may connect its wells produced and saved from the leases premises?

And is this a “pugh clause”: Or is it legitimate in the “marketing of product?” Less a proportionate part of the production, severance and other excise taxes and the cost incurred by Lessee in processing, gathering, treating, compressing, dehydrating, transporting, and marketing, or otherwise making such as or other substances ready for sale or use?

The only other one I am trying to find is the wording of the “Depth Clause” How is that generally worded? The one i find that seems to closely relate to this is worded as: Lots of wording on the “strata and stratum” and no unit for the production primarily of oil shall embrace more than 160 acres or the production of gas more than 640 acres, provided that if any governmental regulation shall permit or prescribe a spacing pattern for the development of the field or be so permitted or prescribed or as may be used in such allocation of allowable."
These have stumped me a bit. I’m working on a reply to the Landman and want to be sure i understand the wording. It is the same as the one our father signed back in 2005, but our father just signed and then regretted it. So I am trying to becoming more versed in this matter for my sisters and myself since our father is no longer with us.

I’m asking for 3/16 Royalty of Gross sales (instead of the 1/8th that is listed). (They have pipeline to which it may connect its wells.) No post production unless worded as the Mittlestat case. (Should i say that?) No Market enhancement clause And 1 year Shut in with no more than 2 cumulative.

**Sorry for the long post — 1st timer here.

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