Negotiating lease in Texas

When negotiating a new lease is it better to get bigger royalty, (offered1/5). Asking for royalty that is production free, What will give a better return on a well. Being a given you weren't going to go for warranty clause, adding in a shut in clause and only a 3 year lease no 3 + 2. Any help suggestions. Madison county

Native American:

In negotiating new leases, this is the order of importance from my end; the highest royalty, the shortest lease term; the highest bonus/acre. Also, pugh clauses, etc. are all components of the lease to pay close attention to when negotiating. Finally, request a check and not a bank draft in order to deter any problems getting paid for the bonus amount. There are so many new operators and lease brokers emerging in the different shale plays that "cold drafting" could become a problem.

Thanks Charles for your reply. This is the infomation I was looking for. We have had one meeting with landman and said we would not accept a draft of any sort. We will accept only a check. Still trying to see what way would be better in the long run. Higher royalty...or market price price with no deductions. Don't want to cheat ourselves.

Native American:

It depends where your minerals are located as how close to proven production is the acreage. If the area is currently being drilled, then your negotiation power will be much stronger. I would ask several figure higher on the royalty end as you could always negotiate down and do some homework as to what the bonuses are in your area. Just remember, this landman is working for a company that has given him a ceiling amount in both bonus and royalty. If he negotiates below that amount, it probably means more in his pocket at your expense. Good Luck!!

Native American said:

Thanks Charles for your reply. This is the infomation I was looking for. We have had one meeting with landman and said we would not accept a draft of any sort. We will accept only a check. Still trying to see what way would be better in the long run. Higher royalty...or market price price with no deductions. Don't want to cheat ourselves.

Native,

Where in the county are you located? As you may or may not know there is a lot of activity in all of the county.

close to Madison/Leon county Tx border


Thanks Charles, need to remember that. They "seem" so friendly and helpful.
charles s mallory said:

Native American:

It depends where your minerals are located as how close to proven production is the acreage. If the area is currently being drilled, then your negotiation power will be much stronger. I would ask several figure higher on the royalty end as you could always negotiate down and do some homework as to what the bonuses are in your area. Just remember, this landman is working for a company that has given him a ceiling amount in both bonus and royalty. If he negotiates below that amount, it probably means more in his pocket at your expense. Good Luck!!

Native American said:

Thanks Charles for your reply. This is the infomation I was looking for. We have had one meeting with landman and said we would not accept a draft of any sort. We will accept only a check. Still trying to see what way would be better in the long run. Higher royalty...or market price price with no deductions. Don't want to cheat ourselves.