Negotiating small lease interests

Hello all. I am new to the site and to mineral interests in general and would welcome some guidance as my sister and I have each inherited from our mother several separate interests in 19 counties in Oklahoma. Most of these are very small (i.e. an undivided 1/3 of .011178 net rev. interest in section...etc.) but a few are larger (i.e. an undivided 1/3 of 20 acres, etc). The leases we've received are apparently pretty standard, but lately I'm receiving some with options to extend. Currently I have an offer to lease 1.333 net mineral acres for 3 years at $100 per acre with a 3/16ths royalty, with an option for them to renew for 2 years at $200 per acre. My question is, are interests this small negotiable? Worth negotiating? If I do not sign the extension will I just get pooled in? Really a novice at all this. Thank you for any help you can give!

I am a novice, so keep that in mind. My first thought is to focus on your lease contents rather then the sign bonuses since, as you state, your acreage holdings are relatively small. It is interesting that you would have holdings in 19 counties, but anyway, you'll likely be handling each individually and at different times (as there is activity and interest in your mineral rights).

Regarding the option, you are best to not permit an option in your lease. The option simply gives the gasco the opportunity to extend your lease or not; well that is obvious, but they will not extend if the market price of leasing acreage is much lower and on the other hand, if the lease price is $5,000 at time of extension and your option says $200, well the gasco will happily extend for $200.

You have a lot of work to do. List all your holdings and determine which counties and then begin doing research to see what activity is going on in that area. In addition of course, investigate who has leased around your parcels.

But again, put your effort into the lease and addendum details; including royalties. Don't worry about sign bonuses as much (unless you find that gascos are paying $5,000 per acre, which does happen in some places).

You'll find you have negotiating power only if your small parcels are important pieces of the pie to complete a drilling unit, provide helpful right-of-way access etc. oh and that gascos won't share that with you, you'll have to research what is going on around you, who holds what, what producing wells in area, near pipelines, who are active drillers, etc.

If you can, take your time and learn what you have.

Good luck,

Wilson

John:

Pay attention to what Wilsontownship is saying in regards to the lease extension. He is correct in his statement about what could occur if an extension is in the lease. You need to gather your information and be sure you are aware of the lease contents before signing. You can click on "Mineral Help" above as there is some good information under this topic in regards to leasing. Good Luck!

I have some tracts similar to yours and I request zero bonus and 1/4th royalty. The lease clauses are also important to me - for example, no deductions, vertical Pugh Clause, limit the liability clause etc. I also will refuse to lease for more than 3 years. I will offer rights of 1st refusal to the Lessee after the initial 3 years lease term.

NewsOK.com business section has free drilling reports 5 days a week, Tues -Sat. Check it daily and copy & paste anything of interest that is near your interest. Keep a file on each county, possibly more than one file for a county that may have multiple tracts that are not contiguous.

Ann Whitchurch

Thank you all for your responses! I've picked up some things I've not thought of before which I believe will help. Is there something like..."Oil & Gas Leases for Dummies" on the bookshelves somewhere? I'd appreciate any suggestions there as well.

The National Assn. of Royalty Owners has some publications, a message board and some outstanding seminars at their conventions. www.naro-us.org

John Kevin Kasparek said:

Thank you all for your responses! I've picked up some things I've not thought of before which I believe will help. Is there something like..."Oil & Gas Leases for Dummies" on the bookshelves somewhere? I'd appreciate any suggestions there as well.