I’ve never negotiated a lease while there was a permit in place. I’m interested in knowing how that affects the bonus, if at all. All thoughts, experiences appreciated. Linton
The replies to my question might be of interest http://www.mineralrightsforum.com/forum/topics/what-happens-if-all-parties-don-t-sign-the-oil-lease?commentId=4401368%3AComment%3A583178
Thanks, AJ, appreciate the heads-up, I’m kinda under the gun here… Linton
You are welcome, Linton. Please share more details as you can.
This is BLK 34, SEC 74 in Ward County, Texas. In 2011 I leased it for $900/nma, 25 percent royalty, three-year primary term, no extension. API 475-36736, Pyote Flats 1H. Elevation holds the permit and is the offering the new lease. Linton
Linton, Congratulations on the exciting prospect! The RRC website indicates Jagged Peak Energy LLC permitted the Peyote Flats 1H http://webapps.rrc.state.tx.us/DP/drillDownQueryAction.do?fromPublicQuery=Y&name=PYOTE%2BFLATS%2B74-34&univDocNo=488454700
Is Jagged Peak a subsidiary of Elevation? Or did Elevation acquire the permit from Jagged Peak?
Did an oil and gas attorney assist you with the lease in 2011? I have read that post-production charges found in a so-called "producer's lease" can dramatically reduce royalty payments. You are most likely going to need an attorney to make sure the lease is not too one-sided. Others can certainly comment more authoritatively about lease bonuses in Ward county, but it seems possible that you might get much more than $900/acre bonus given the proximity to other producing horizontal wells. $3000/acre?
Thanks, AJ. Yes, Elevation has taken over from Jagged Peak. I did not have an attorney help negotiate that lease but am seriously considering it this time. I used Wade Caldwell for my last lease, and I agree it is the wise thing to do. I told Elevation I thought at least $2,000 was more in line with a reasonable bonus. They disagreed. I then suggested a lease that increased yearly if they had not drilled. Guess time will tell. I don’t want to be unreasonable, but I don’t want to give it away and set a poor precedent either! Linton
From his posts on this forum, I believe you are good hands with Wade Caldwell. How about a "most favored nations" clause with regard to the bonus? Again, congratulations and good luck with your negotiations.
I had never heard of the “most favored nations” clause before. That sounds like something I would definitely be interested in discussing with Elevation. I also have a retired district judge that is very well versed in the oil and gas field lined up to help me with this lease, so I’m ready to rock and roll if I ever get a decent offer. I’m certainly not going to tie it up for three years at that price with the market as uncertain as it is, a presidential election pending and all the wars going on that could change things drastically any minute! Thanks for your time, attention and sage advice, AJ. Linton
You are welcome, Linton. I think a practicing oil and gas attorney is an absolute must in your situation. Note that even though a lease may seem to read one way it can function very differently: http://www.mineralrightsforum.com/forum/topics/fayette-county-tx-oi...
Consider excluding the shallower depths from the lease. There are smaller companies which drill the various Delaware formations. You should benefit from the bonus for the shallower formations rather than another company buying the shallow rights from Elevation. Do not buy into the argument that "if we drill through it, we earn it" from an oil company. Too often companies hold nonproducing formations for decades without drilling because they use those 'estimated reserves' as part of their asset valuation for loans. They do not necessarily share your viewpoint that all the minerals should be developed. Elevation's interest is in the Phantom (Wolfcamp) and the company needs your lease. In my experience, this exclusion will not affect your bonus.
Hi TennisDaze! Thanks bunches for your response and Merry Christmas. I am going to send a friend request to you because I would like to discuss some things with you further off-grid so to speak. Hope you’ll accept. Thanks again. Linton