Leasing info for out of state owners

Oil and Gas Leasing Help
1

Hello all. My brother, sister and I live in CA and own 22.5 acres in a pool of 173.19 mineral acres in Tyler Co, WV We have been approached about leasing the mineral rights for an initial signing bonus of $3000 peracre, 16% royalty payments for a five year lease and a five year renewal option at $3000 per acre resigning bonus.

Does this sound like a doable lease and/or should we get an attorney in the area and if so does anyone know of a reputable and knowledgeable one?

Also, are there any pitfalls we should be aware of?

Thanks for looking, Jeff

2

Jeff:

First, I am not familiar with WV area but I am aware that drilling activity has increased greatly over the past couple of years. As you can tell based on the bonus amount offered, the area has become increasingly hot for leasing prospects due to the success in drilling. I would not lease for longer than 3 years and would not consider any lease extension. From what you said, an operator could virtually tie up your lease for ten years before any decision to drill is made. I would also negotiate a higher % royalty but further research is needed on your part to learn the going rate. Good luck and be sure to take your time before signing on the dotted line.

3

Thanks for replying Charles. The first draft of the lease offered has the leasing company with the option of extending for five years at the same rate, but not us with the right of refusal or renegotiating. It looks like you are right that they could tie it up for ten years with no activity. Have you seen leases of shorter periods with no extensions, I thought this lease was pretty standard. As you can tell, not really experienced in this. Also, anyone know a reputable gas/oil lease attorney in WV? I was born there but that was a long time ago.

Thanks again.

charles s mallory said:

Jeff:

First, I am not familiar with WV area but I am aware that drilling activity has increased greatly over the past couple of years. As you can tell based on the bonus amount offered, the area has become increasingly hot for leasing prospects due to the success in drilling. I would not lease for longer than 3 years and would not consider any lease extension. From what you said, an operator could virtually tie up your lease for ten years before any decision to drill is made. I would also negotiate a higher % royalty but further research is needed on your part to learn the going rate. Good luck and be sure to take your time before signing on the dotted line.

4


Jeff:

I have all kinds of leases with different terms, etc. Best bet is to not tie up your holdings for an extended period of time (3 years) with no extension. This way, you will benefit from the current rates if no drilling has occurred. You might want to click on "Groups" above, go to the WV area and click on your county. These are individuals that have interests in the area.


Jeff Grimm said:

Thanks for replying Charles. The first draft of the lease offered has the leasing company with the option of extending for five years at the same rate, but not us with the right of refusal or renegotiating. It looks like you are right that they could tie it up for ten years with no activity. Have you seen leases of shorter periods with no extensions, I thought this lease was pretty standard. As you can tell, not really experienced in this. Also, anyone know a reputable gas/oil lease attorney in WV? I was born there but that was a long time ago.

Thanks again.

charles s mallory said:

Jeff:

First, I am not familiar with WV area but I am aware that drilling activity has increased greatly over the past couple of years. As you can tell based on the bonus amount offered, the area has become increasingly hot for leasing prospects due to the success in drilling. I would not lease for longer than 3 years and would not consider any lease extension. From what you said, an operator could virtually tie up your lease for ten years before any decision to drill is made. I would also negotiate a higher % royalty but further research is needed on your part to learn the going rate. Good luck and be sure to take your time before signing on the dotted line.