Leasing in Hemphill County

We were offered $175/nma and 3/16, and came back with a prior negotiated agreement with another company of $400/nma and 1/5. McAfee countered with $300/nma ("only authorized to go that high") and 1/5.

I read mention in the forum of others who had gotten leases of $500/nma and 1/5 last year. What is the going rate in Hemphill Co?

Where in the county are your minerals located? It seems as if things vary from place to place. Are you in an oil area or a gas area? Also, a lot of leases have "non disclosure" clauses in them. People are not supposed to tell what they got, but people do eventually talk.

Cynthia, in retrospect, my reply was not all that informative. I am a bit of a neophyte in the oil business, so my knowledge is somewhat limited. However, there is a lot to be learned on the internet. This link is the Devon Energy's 2011drilling report. http://www.iadc.org/conferences/LD1/S%20Chesher%20IADC%20Presentation%205-19-11.pdf

Locate your property on the map and determine which field it is in or closest to. Then go to the Railroad Commission's website map and look at just how many wells are in your location. This will give you an idea of where you stand. Are there pre existing pipelines in the area? If so, your position is better than if the product is stranded.

The commission's map is difficult at first, but you will soon get the hang of it.

In Hemphill County there are hot areas and cold areas. My family's properties are in the cold area. In 2010 we were approached by a landsman looking to lease the ranch. Some of my cousins took his offer which was pretty much like that which you were offered.

The rest of our family elected to have the bargaining done by one of my cousin's daughter. She was very knowledgeable in the oil and gas business. She promptly found out just who the landsman was working for and why they wanted the property. It was a company that develops oil and gas properties and then sells them.

We realized that they would probably not drill our property, but were just fluffing a project for resale. That is their business model. I cannot tell you how much we got for the signing bonus, but it was between $749 per acre and $751 per acre. The royalty was between 24 per cent and 26 per cent. Since they had no intentions of drilling, they could afford to be generous with the royalty.

That lease has expired, and we were soon approached by a landsman with a very low ball offer. We opted not to re lease because the price of the product is now so low. If there is something down there, it needs to come out of the ground when prices are higher.

If you do decide to lease, have your oil and gas lawyer prepare the lease. It will cost you, but it will pay off in the long run.

Sometimes it is better to not lease. We have some Devon wells that pay us basically nothing. And we have to pay property taxes on those darn wells.

Good luck,

Robert Gill