We recently received mineral rights passed down through literally generations of family. After transferring ownership, we received notice from Conco they want to amend the lease.
Currently there is a vertical well on the land that is nearing end of life. Our lease states Concho loses rights to the lease if they cap the well or stop producing.
Concho have requested we agree to a lease amendment that allows them to cap the vertical well and allows them to maintain the rights for 30 months. They have stated the vertical well is now to costly to maintain and they will consider putting a horizontal well on the land when the market demands. (No guarantee this will happen). They offered a one-time consideration of $1500 to motivate is to agree to the amendment.
Location: Section 11, Block 40, TS 2, T & P RR, County Survey, Midland County, Texas
Is this a sound offer?
What are my options if after 30 months they have not deployed a horizontal well?
Does Concho have exclusive drilling rights in this area?
Thanks in advance!
This is essentially the expiration of your current lease and granting of a new lease. The amendment can contain multiple updates to the terms of your current lease, such as an increase in the royalty rate to 25%. Do you know how many net mineral acres you own? Bonus is generally measured in dollars per acre. If you own 1 net mineral acre, then the offer is $1500 per acre. If you own 10 net mineral acres, then it is $150 per acre. How reasonable the bonus is depends on this difference. There is a difference between gross acres in a legal description and your fractional share which is the net acres. Take time to do some research. There are articles on this website and a very good leasing paper called Hints on Negotiating an Oil and Gas Lease by Judon Fambrough through Texas A&M Real Estate section which you can download for free. The lease details matter as the lease may go on for decades.
We have 1.25 net acres.
The lease terms they are looking to amend is related to capping the vertical well.
The current lease expires if they cap it.
They want 30 months to consider deploying a horizontal well.
That is the only change to the lease agreement.
Few oil companies will offer lease amendment terms which are favorable to mineral owner. You have to ask / demand them. Read your lease and research oil and gas leasing such as mentioned above. At the least, get an increase in your royalty rate, assuming it is not already 25%.
Suggest you contact your neighbors who share royalties on the well and try to collaborate.
Thanks for the input. I have some reading to do.
The current lease was signed in 2008. Looks like the royalty rate is 20%.
I was gassed at the Binkley 37-1H. This lease and many others were never inspected and have an H 9 form. This gives leases permits to use flares and etc. Diamondback Energy is cheating. They had over 50 wells not permitted. They were operating leases illegally. Im now permanently disabled with chemical burns in my lungs and throat with throat disease with polyps. I have lumps forming all over my body. My bp is usually around 160-190 daily. Take them to court. Diamondback is under lawsuits for tank explosions currently.
Care to share a copy of the lawsuit you have filed so we can verify the event and warn others?
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