Leasing with or without option

Texas Mineral Rights Reeves County, TX
1

We have been negotiating our two sections in Reeves County for the past month with three different companies. The bonuses are all about the same, 3 years, 25% and all three insist on a 2 year option. From everything we have read an option is not the way to go for the landowner. All three companies say with the infrastructure in Reeves County they need the extra two years (rigs/equipment). We would like to say no to the option but are dealing with several family members and have a fear of being dropped and getting nothing.

Any suggestions from anyone?

M and K Haag

2

I ran into the same issue back in 2008 and this year. I gave in this year. I do at least receive the same bonus for the 2 year option as the initial 3 years. It is a win/win for the oil company because if rentals go down in 3 years, they just don't exercise the option. If they go up, they get a cheaper lease. The only down side to them is in my case they will pay the same amount for a two year lease as they did for a three. I just don't know how many other landowners are conceding this.

Dan