Yesterday I received a notification that there is a hearing about a proposed new horizontal well that passes through my acreage in Grady county. Today I received a letter from an attorney outlying my proposed options for my interest, and I just want to make sure I understand them.
My options are :
To participate to the full extent of my interest the cost is appx 11M and this will include all owner interest.
Lease/assign my interest for a bonus of 1500 per net acre and an 87.5% (1/8) net revenue interest
Lease/assign my interest for a bonus of 1250 per net acre and an 81.25% (3/16) net revenue interest
Lease/assign my interest for a bonus of 1000 per net acre and an 80% (1/5) net revenue interest
This is just a vague guess (I think I figured it out once) but I believe if you took all of the partial interest I own in this area and mushed it all together, in total I own somewhere between 6-8 acres.
So option 1 I have to pay my share of the 11M (about $43,000) but would then receive 100% of the royalties on my portion.
Option 2-4 I would receive a 1 time payment ($7000-$10,500 appx depending) and future royalties would be the stated ones.
So, do I understand these options correctly? If so, which would you choose (option 1 not really viable). What happens if I don’t pick an option? Finally, when can I expect to get the bonus?
This is a “courtesy” letter right before pooling to gather up the last folks who might want to lease. You do not have to answer the letter. It is not advisable to have a signature on a letter before you have even seen the lease.
I would not recommend that the general novice mineral owner who is not involved in the business pick option 1 as a working interest partner. They do not have the deep pockets for this well and future wells, knowledge, would need a good attorney, good CPA, drilling and liability insurance, plus burden their heirs with ongoing payments and plugging liability for decades.
You can choose to lease with the operator or you can choose to lease with a third party or you can choose to wait for the force pooling which is likely pending. If you lease, very wise to get a good oil and gas attorney to review the draft lease. They are not generally in the mineral owner’s favor and need extensive edits. Force pooling has its own advantages and is another alternative.
If I can get an excellent lease on my terms for 25%, then I will lease. If the operator is not accepting my lease, then I go to pooling and pick the highest royalty option.
If you lease, NEVER hand over a lease without getting paid the same day. Your attorney can hold the signed lease until payment is received and in the bank. Then they send the lease to the agent. If you pool, the bonus comes in about 30-35 days.