Lessor oil production costs?

G. Win · 2013-03-22T15:31:17Z

I have interests in a well that was drilled and oil was found, but it was not a profitable producer. However, it was leased again by a company till June of 2013. A company has since purchased the lease from that company and was planning to drill horizontally. However, they called and will not be able to start by the lease deadline. Therefore, they are offering a new lease. I own mineral rights to 160 acres. I received a letter with a lease offer of $400.00 per net mineral acre with 1/4 royalty in a 3-year primary lease for 80 acres, and a $400.00 per net mineral acre with 1/4 royalty 2-year extension option. 1st. To deliver in-kind to Lessor, at the well, or to the credit of lessor into the pipeline or storage tank to which the well may be connected, 1/4 part of all oil and other liquid hydrocarbons produced, recovered or separated and saved from the leased premises. In lieu thereof, lessee shall have the option, at any time, to sell lessor's oil, in which case lessor's royalty shall be based on lessee's net proceeds at the lease or to purchase lessor's oil at the lease. In any event lessor's interest shall be free of all costs of production, but shall bear its proportionate part of production and similar taxes, and shall share proportionately with lessee in any costs to market, transport, or condition the oil. Is this normal that the lessor shares in any costs to market, transport, or condition the oil? Is this offer reasonable? I have researched horizontal drilling. They save considerable production costs when the vertical drilling is already done. I thought that a lease would be for the full 160 acres and not just 80. Is it normal for the company to only offer to lease 80 instead of the full 160?

Oklahoma Mineral Rights Garfield County, OK

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