I am wondering how common it is to be asked to sign a Letter of Intent (LOI) prior to signing an O&G lease? The amount of mineral acreage is high, but only about 40 acres is definitely free to lease. The remaining acres need to be researched and old nonproductive leases terminated if possible. The O&G Co is offering good terms on all the acres and will pay the bonus within 30 days on the clear acres, 90 days on the acres they will research and work to clear. They want an LOI that we will lease any and all acres they clear to them.
Personally, I do not sign letters of intent as that would prevent me from talking to other leasing agent who might offer better terms as drilling gets closer (exactly what they are trying to prevent). If you have not leased before, recommend that you get a good oil and gas attorney to review the draft lease as they are rarely in the mineral owner’s favor and require quite a bit of editing. A local attorney may have knowledge of better offers in the area. Also, NEVER hand over a lease without getting paid the same day. Your attorney or accountant can hold the signed lease until payment is received. You do not want a lease to be filed without you already having the funds in the bank. (30 days often means six weeks of business days. 90 days means months of waiting time!)
I understand that title must be run in order for them to be able to pay and that takes time, but protect yourself by getting good legal advice on the clauses and not handing over a lease without payment. The wording in the lease clauses is way more important than the bonus they may be offering.