Negotiating a Mineral Rights Lease in Kern County, CA

Oil and Gas Leasing Help
#1

Hello all. I am new to this community and very happy to be a part of this educational forum. I currently have a 40 Acre lot located at Township 29 South, Range 24 East MDB&M in Kern County California. Im currently in the process of contacting and eventually negotiating a lease agreement and would appreciate any advice there is. Ive done quite a bit of research on my own and have learned quite a bit but still have a few questions.

To the best of my knowledge, many surrounding and nearby lot have already developed profitable wells by Occidental Oil & Gas. Occidental also made me an offer in early 2010 for a lease but I never pursued it.

1) What is the best way to accurately speculate the potential value of our mineral rights based on neighboring properties and negotiate the lease. Im not well educated in these methods of locating lots and would not be able to calculate how far other members' lots are located despite reading their discussions. Although i presume a few must be relatively close.

2)If my lot is 40 acres, how would that translate in net acres on which the lease is designed?

3) Another question would be regarding a traditional lease contract versus pooling. I understand the pros and cons vary from state to state and if anyone could give any advice specific to California.

4) I was also wondering if anyone recommended any other Gas and Oil companies other than Occidental to reach out to for a lease in Kern County. I understand that you want to sign a lease with a company who will be the end producer and not simply flip your lease agreement. Any advice?

5) Finally, i was wondering if anyone had recommendations for a good attorney of professional in this field to assist in negotiating the lease.

Any advice is greatly appreciated.

Thank you fellow members of mineralrightsforum.com!

#2

There are a lot of questions here, but I'll see if I can help.

1. I do not recommend worrying about what your neighbors negotiated for a lease. The leases may be many years old. The location of your acreage is how the lease value is determined, along with number of acres. Your acreage is located near Elk Hills. Current rents run between $35 and $50 per net mineral acre. 1/6th royalty is typical.

2. Your net acreage is a function of the percentage of interest that you own in the 40 acres. Many interests are fractionated in Kern County. For example, the 40 acre parcel may have been owned by someone in your family. That person passed away and gave it to your father and his sister (your aunt). Thus, your father would only own 50% of the 40 acres, or 20 total net mineral acres. Your negotiating power is directly related to the net mineral acres that you own.

3. Almost all California leases contain a pooling provision. In this area it is unlikely that an oil comapny will drill a well on your land. They will want to pool your acreage with those in the area in order to have a large parcel of land which they may wish to horizontally drill. Given that you have not been approached since 2010, however, Oxy may no longer be interested. In my opinion, however, they will be your best chance to successfully lease your minerals.

4. As indicated above, your acreage is located near Elk Hills, which is almost exclusively the realm of Oxy. It is unlikely that another oil company would be willing to take a lease on a 40 acre parcel there.

5. I am an oil and gas lawyer. I believe that my firm is the only oil and gas firm in the Central Valley. There are some independent oil and gas lawyers in Bakersfield as well as lawyers in Los Angeles and Sacramento. Unless you have 100% interest in the minerals (the landman who is attempting to take the lease should be willing to tell you this), you might wish to simply enter into the lease. A lease review by a lawyer is an attempt to balance the provisions of the lease to be more fair to the lessor. The lease, however, is a binding document and California has stringent standards for the health and safety of Californians.

I hope this helps. I wish you well in your leasing endeavors.

Jean M. Pledger
EHRLICH ▪ PLEDGER LAW, LLP
Bakersfield, California

#3