We received a new lease agreement to sign for Lea County, NM. The property is Township 16 South, Range 36 east N.M.P.M. Section 10:SW4SE4. The lease is totaling 40 acres. We have 5 NMA. They offered:
Any feedback?
I had a lease in Lea County a few years ago and it was very similar. (3 years with $200 bonus per acre) so it sounds good to me. Do you mind if I ask what company? I’m curious to know if the original company our lease was with is still in the area. We have rights on lots that comprise over 300 acres in Lea county but our previous lease was for a quite small area.
The lease was offered by Matador (MRC Permian Company.) Should I get a 25% royalty rate? Should I only accept a 3 or 6 year term?
3 year with NO OPTION TO EXTEND. 25% is a very good royalty in most cases. I want them to drill or get out. The bonus money is not always very important but should be about one-third the price of buying the actual mineral right. And beware of anyone offering “bank drafts” for payment.
Though our lease started in 2015, it was 25%, 3 years with an option at the end for 2 more years (which it did) and $200 bonus. We were told by a friend in the industry who looked over the terms at the time that this was customary and a good contract. So yours seems to be good.i can’t find anything to say that terms have changed drastically since then. You may want to check with someone in the industry specifically concerning Lea County right now since it is hugely productive right now. I’ve also been trying to do some research for more updated information, and am hoping to get another lease on ours.
It is my understanding that Matador (if it’s them) is the only legitimate driller in that area. There are other companies trying to flip leases, but I rather deal with the actual driller. In that section 10, there are no wells in that section or any section around it, so I don’t know if it’s any good or not. It’s my understanding this is a wildcat area. Be careful with people telling you to only lease for 1/4 or no option or any of that…easy to say when they’re not the one getting the offer or they haven’t signed anything in your area. Regardless of what people think, not every single permian area is worthy of 1/4 royalty, especially in an area that has not yet been proven. I don’t want to be force pooled either. Try to hit them up for more money or royalty, and if they are steadfast, then make your own decision not based on what other people think about an area they have no idea about. Personally I take the deal especially if nobody else is contacting me. They can pull out at any time and then you have Zero offer.
[quote=“pollytabeling, post:1, topic:81005”] 1-Personally, I will not do an option to extend. Three years is long enough. An additional three years puts control all in their hands and I would rather have a choice at that point.
2 Bonus amounts are not public, so you would have to ask around at the coffee shop and here to see if anyone has gotten a better offer.
Royalties in that township in the last 24 months have ranged from 1/8th to 1/4, so ask for 1/4 and maybe settle for 1/5th if they won’t give it.
I don’t warrant title. They want you on the hook for the attorney fees if title is not clear. If you are certain yours is clear, then you can accept it.
Armstrong has a rig onsite as of now in section 20. BTA has the horizontal permits in the township right now.
Ollie, do you cross out any pooling wording in leases you receive?