A group of people have interest in one quarter.Most of them leased to the same company for the same bonus for three years, and two of them leased with another company for 5 years.What would be the advantage of the 5 year lease?
Thanks, Bob
They may have received a better bonus and/or a better royalty for signing for 5 years.
Bob:
The above could be correct in that the 5 year lease yielded either a greater bonus or it could be the same as a 3 year lease. I would never lease for longer than 3 years as too many factors could change in the mineral area.
Bob,
The real advantage is to the lessee as it controls mineral rights longer. Whether the advantage was paid for or how much is irrelevant to the other lessors. In frontier areas, shorter term leases may create a disadvantage to all lessors if it isn't worthwhile for an operator to extend the short term leases and doesn't drill. In that case, everybody loses.
Thank you all.On another note,the lease in question expires Dec.12.I have been contacted by Longfellow and they want it for another 3 yrs at $400 since they can't meet the deadline.I told them $500 would be more appropriate since we leased 4 quarters this summer at that amount.I'm a bit skeptical about the additional time. What would you advise? Thanks, Bob
If you were my client, I would advise you to let the lease expire for legal protection, then with other acreage in what may be a developing area, propose a deal to the most newly successful operators in th area. If Longfellow is an operator drilling wells (I don't know them) in your area it may be worth their while to extend the lease for a year or two at significantly more than they are offering for a three year lease. If Longfellow is a land company speculating on leases, you may earn the profits they would make on trading your lease.
Bob Hunter said:
Thank you all.On another note,the lease in question expires Dec.12.I have been contacted by Longfellow and they want it for another 3 yrs at $400 since they can't meet the deadline.I told them $500 would be more appropriate since we leased 4 quarters this summer at that amount.I'm a bit skeptical about the additional time. What would you advise? Thanks, Bob
Gary L. Hutchinson said:
If you were my client, I would advise you to let the lease expire for legal protection, then with other acreage in what may be a developing area, propose a deal to the most newly successful operators in th area. If Longfellow is an operator drilling wells (I don't know them) in your area it may be worth their while to extend the lease for a year or two at significantly more than they are offering for a three year lease. If Longfellow is a land company speculating on leases, you may earn the profits they would make on trading your lease.
Gary L Hutchinson
Minerals Management
Bob Hunter said:Thank you all.On another note,the lease in question expires Dec.12.I have been contacted by Longfellow and they want it for another 3 yrs at $400 since they can't meet the deadline.I told them $500 would be more appropriate since we leased 4 quarters this summer at that amount.I'm a bit skeptical about the additional time. What would you advise? Thanks, Bob
Thanks, Gary
Longfellow is one of the bigger players in our area and has the other 3 quarters in the section leased.As of today, I've not heard back from them.Guess it doesn't cost anything to wait them out.
Bob