New to leasing - Don't know if offer is good or bad

Texas Mineral Rights Karnes County, TX
1

My brothers and I recently received a lease agreement from a landman that refers to a warranty deed as follows in part:

1.25 acres… Karnes County (TX)… Abstract No. 218… deed dated Nov. 14, 1914…

… from H. K. Kendall and wife Johanna Kendall to Miss Adeline Brockman… volume 75, page 409, Karnes County.

The mineral rights were apparently transferred to my grandmother, John Leland (Brockman) Kainer, then to my mother Mary Francis (Kainer) Fernandez, and finally to my brothers and me.

The proposal terms read:

Interest = 7/360th of 1.25 acres which amounts to an undivided 0.02430556 net mineral acre.

Bonus: $500 per mineral acre X (0.02430556) = $12.16 Royalty = 20% Lease: 3 yrs

Do these amounts sound typical?

The lease refers to a 1/8 share on main document then amends the 1/8 to be 1/5.

Again, is this typical for a lease like this?

The landman said that the property is small and that it is on the edge of the other property so we shouldn’t expect to get very much in return.

2

The 20% royalty is low for the area IMO - 25% is the norm as I understand it.

Bonus numbers in Karnes County tend to run in the low 4 digits.

3 year term is normal term for area.

3

Brian, I can’t answer your question: “Don’t know if offer is good or bad.” I will say your minerals are in a very active area of Karnes County. This small amount of acreage might be worth more than just a small amount of money. Just my opinion.

GIS Map of Karnes County A-218 and surrounding area:

4

Thats good info, thanks!

Rock Man said:

The 20% royalty is low for the area IMO - 25% is the norm as I understand it.

Bonus numbers in Karnes County tend to run in the low 4 digits.

3 year term is normal term for area.

5

Thanks Clint. I’ve seen maps of the area but never with the oil and gas details.

Clint Liles said:

Brian, I can’t answer your question: “Don’t know if offer is good or bad” I will say your minerals are in a very active area of Karnes County. This small amount of acreage might be worth more than just a small amount of money. Just my opinion.

GIS Map of Karnes County A-218 and surrounding area:

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image600×600 35 KB

Clint Liles :play_button:

6

1/4 Royalty and a $750 - $1,000 flat fee for bonus would be more appropriate.

7

I really appreciate the replies so far. - Rock Man, Clint Liles, Mike E.

I made a counter offer a few days ago that was above what the Oil Co. (.E..O..G.), was offering → (1/5 w/$500 bonus), and just heard back from the landman today.

He said that the Oil Co. rejected my counter offer.

Here is part of the email;

However, the current offer still stands, and if you were to decide to sign the lease you are still able to do that. We currently have signed Oil and Gas Leases from your father and three brothers, and it is our goal to get you, your brothers, and father into pay status as soon as possible.

What is he implying when he says “… if you were to decide to sign the lease you are still able to do that.”?

I asked the landman several days ago, how long I had to make a decision but he never answered the question, even in his latest reply. He has flat out avoided answering some of my questions!

I would like to get at least 1/4 with a close to $1000 bonus. My question is, that if the Oil Co. doesn’t ever accept my counter offer, then what other options do I have to get raise my royalty and bonus amounts?

Will I lose any chance of receiving royalties if I don’t sign the current lease agreement?

8

Thanks Mike.

Mike E said:

1/4 Royalty and a $750 - $1,000 flat fee for bonus would be more appropriate.

9

Seems to me that the landman means the original offer is still out there and available if you want to accept it.

The $1000 bonus is a great goal to have, but considering you only have 0.0243 net acres, not a lot of money under consideration.

I highly doubt that EOG will pay anyone a flat $1000 per acre bonus regardless of net acreage in question. This would set a precedent that would be intolerable for the operator.

But holding out for 1/4 royalty is worthwhile to do IMO.

Not signing a lease does not cut you out of royalties but it does delay them until at least after well payout - or you can join the operator and pay your percentage of the well and all costs to earn your proportionate share of the royalties for that percentage.

The previous situation gets VERY complicated - I would suggest you do a lot of research before opting to go down that pathway.

By the way, is your offer different from what your father and brothers received and signed for?

steven brian fernandez said:

I really appreciate the replies so far. - Rock Man, Clint Lies, Mike E.

I made a counter offer a few days ago that was above what the Oil Co. (E.O.G.), was offering → (1/5 w/$500 bonus), and just heard back from the landman today.

He said that the Oil Co. rejected my counter offer.

Here is part of the email;

However, the current offer still stands, and if you were to decide to sign the lease you are still able to do that. We currently have signed Oil and Gas Leases from your father and three brothers, and it is our goal to get you, your brothers, and father into pay status as soon as possible.

What is he implying when he says “… if you were to decide to sign the lease you are still able to do that.”?

I asked the landman several days ago, how long I had to make a decision but he never answered the question, even in his latest reply. He has flat out avoided answering some of my questions!

I would like to get at least 1/4 with a close to $1000 bonus. My question is, that if the Oil Co. doesn’t ever accept my counter offer, then what other options do I have to get raise my royalty and bonus amounts?

Will I lose any chance of receiving royalties if I don’t sign the current lease agreement?

10

Steven, I have not seen you mention that you are drillsite tract and I believe they never have to pay you if you have not signed a lease and are not drillsite tract. It’s not easy for me to say this but it might be best to accept the offer since your fractional acre is so small.

I don’t believe they have to allow you to participate under Texas law.

Even if you were allowed to participate for your fractional acre, I believe you would not find it worth the effort from the paperwork alone, much less watching the operator to make sure they are not making any “extra” off you.

I believe in fighting the good fight to get paid decently for the right to produce your minerals and to be paid adequately for the production of your minerals, I just don’t see where you have any leverage.

If you are not drillsite tract, I would sign the lease and have done with it. I think they are going to drain you either way. It’s the best advice I have with the information I have.

11

Thanks Rock Man.

My Dad’s lease was written a little differently but I haven’t seen or know the details at this point.

On the other hand my brothers and my lease agreements are the same.

12

Thanks Kennedy. I don’t think it is a drillsite, at least I haven’t heard anything mentioned.

I agree that I really don’t have much leverage. I was starting to feel that way.

I do however feel that there is still a chance to get them to at least come up to 1/4 royalty.

If they gave me $1000 bonus I’d get a whopping $24.32 !!!

13

Steven, I figure everyone’s time is worth something, including yours. If the landman has an hour’s worth of time in it that would be a couple of times the amount you have been offered in bonus. I don’t want you to be working for $1 per hour.

14

That’s a good way to look at it!

Appreciate it, thanks.

r w kennedy said:

Steven, I figure everyone’s time is worth something, including yours. If the landman has an hour’s worth of time in it that would be a couple of times the amount you have been offered in bonus. I don’t want you to be working for $1 per hour.

15

The landman for EOG says that EOG will not go any higher than a 1/5 royalty.

I asked what everyone else is getting and he said;

To the best of my knowledge everyone in Karnes County is getting 20% royalty.

He said that everyone else in the pool has signed and that they will file lease agreements later this week.

I was really hoping for a 1/4 royalty but it looks like it’s not going to happen. I feel like my hands are tied here. I’m wondering if I try to delay/hold out, if EOG would negotiate? What if I asked to change the term from 3 years to 1 year? I just don’t know what to do at this point.

Any advice based on this new information?

16

Steven,

Considering the small amount of acreage you have my opinion would be to take the 1/5 royalty.

You can ask about the 1 year deal but I doubt you will get it. Good luck on your lease.

17

Thanks Clint.

18

I know that some people for a fact are getting 25% royalties in Karnes.

But with that being said, your small net acreage position doesn’t give you a lot of room to fight.

If it were I - I would sign the offer.

19

Thanks Rock Man.

That’s what it’s looking like now.

I really appreciate you and the others that have replied and offered support.