Hi all, I recently found out that my grandfather bought 10 acres of mineral rights in Reeves County, probably in the 1920's. A man from Texas Petroleum Land Management has called all 7 of us grandkids wanting us to sell or lease. We are all scattered and haven't talked since our childhood so it's been an individual decision for all of us.
The facts are: 2560 acres, more or less, all of Sections 30, 32, 36 & 38, all in Block 56, Township 3, Reeves County, Texas. I own less than an acre.
I've been offered $1000 to lease for a 3 year Primary Term with a 2 year option, 20% royalty and received a 3 page contract which I do not understand and there are no dollar amounts listed, other than "Lessor, in consideration of Ten Dollars." I do not want to sign something that I don't understand, but can't afford a lawyer. The man calling keeps telling me that if I don't do something the state will end up with my little "less than an acre."
My questions are: Is this a fair price? Shouldn't the contract say $1000 is owed me before I sign it? Will the state really get it if I do nothing? This 2560 acres is listed on this website for lease right now and can they lease it without all owners having signed a lease? And any other advice is welcome as I know absolutely nothing about any of this. Thanks beforehand, Jo Ellen Gillmar
Let me answer the easy question. A company can acquire leases and drill a well without all mineral owners in a tract agreeing to a lease. The non-leasing lessor gets "carried" or receives no revenue until such time as the well pays out, or the time that the oil company gets all its drilling and monthly operating costs back.
If you are really concerned, look around for an experienced professional landman or a lawyer to review your lease. It shouldn't cost that much.
He's not telling you all the facts. You own the land and are not required to do anything with it. This isn't relinquishment act land, it is fee land. If you don't make a lease and they drill a well then you get 100% of the revenue attributable to your interest after 100% payout of the well, less your proportionate costs.
There are wolfcamp wells that are pretty good close to that area. His offered lease rates are low, especially regarding the royalty. Furthermore, I wouldn't sign the lease they gave you. It's a producers 88, and a bad form for you almost 100% guaranteed. Reeves County is the darling of the Delaware Basin right now.
If you want to make a deal, then talk to one of the operators or someone who will deal with you honestly. Resolute owns leases there and so does Cimarex. Hope this helps.
Traditionally the consideration clause only references a nominal payment. Any owner can sign a lease with respect to his own minerals and it does not affect other owners. There has been a lot of leasing around there in recent years, but not drilling activity yet. Recent area leases to Anadarko, Resolute, BHP and Dorado. I really do not like to deal with landmen who try high-pressure tactics to get you to sign a lease. There is not a rush as no one is drilling. The state is not going to grab your minerals. If a well is drilled, then applicable revenues could be put into suspense and eventually sent to the state, but that is years away. Take your time to understand the lease terms. Ask the landman for his take-off which shows your exact net acreage and title to you. If title is still in your grandfather's name, then you and relatives will need to file in deed records. The bonus should be paid per net mineral acre. Ask for 25% royalty. Read royalty carefully to be sure that it says 25% royalty (you get entire 25%) and not 25% OF royalty as the latter means you get 1/4 of the royalty and the lessee gets 3/4 of royalty. Unfortunately, I have seen such tricky language. I do not know if $1,000 per acre is reasonable for 3 years and others can comment on this. If you agree to a 2 year extension, make it 150% of original bonus ($1,500). Your minerals are in multiple sections and so you either want to have separate leases for each section or have language for release of nonproducing acreage and depths. So one well will not hold all 4 sections. Good luck and enjoy learning about oil and gas leasing.
Here is link to an article to start from Texas A&M center. https://assets.recenter.tamu.edu/documents/articles/229.pdf
Here is a link to sample lease and surface agreements to give you more understanding of issues.
https://www.earthworksaction.org/files/publications/Texas-Sample-Model-Gas-Lease_201106.pdf
Being a Realtor and a 100% land/mineral owner, my "rule of thumb" with negotiating (and as per a Mineral Manger's recommendations) is to start HIGH, ex., $2000/acre - 40% royalty - four year primary. Negotiate this FIRST and get your agreement in writing (email ok). Then move on to negotiating the other lease provisions. These leases are very onerous - which means, not in your favor or best interests.
Good luck,
Pat
Many thanks to all of you that replied. It's nice to get some impartial information. Now to study everything that was said...
ELLEN,
Study Brandon Benson Reply then contact your long lost cousins and consider doing nothing. His method is the least expensive for you all. If you each become part of an oil field development, the operators will find you, document your rights, and provide you with enough information to decide to hold or sell while getting a good deal for your small acreage. Thank your grandfather for his thoughtfulness so many years ago.
Gary L Hutchinson
Advocate for Inherited mineral rights owners.
Hi Gary, yes it's out of respect for my grandfather (Pop) that I didn't want to just let it go. He died when I was young so there's not much memory of him. My brother has already sold his portion and I'm not sure what the rest have done, but you are probably correct.
I'm very impressed that total strangers are so helpful on this site. It's nice.
Hi TennisDaze, that's interesting about the royalty and OF royalty and what a difference it would make.
A guy called me yesterday after I posted and said there are no deeds to mineral rights, so I also appreciate your point on that.
I will use the links...thanks.
Yes, Brandon, I knew he had to be a middleman with something to gain. You've thrown in a couple of terms that I'll have to learn. Valuable info you've given me so I'll probably sit tight for now. Thanks.
Hi Pat, my Daddy was a realtor so I get your point. I knew that lease he sent me could not have been in my favor. Thanks for your reply. Now I've got some numbers and information that will help in the future.
Good to know, Tim. It seems I have plenty of time to figure this out now with no rush. Thank you.