I am an absolute novice in this realm, so please forgive my ignorance.
Years ago, I inherited the mineral rights on 360 acres in Pondera County, Montana. The land had been in the family since the 1880s and had been leased to a rancher for grazing cattle. In the 1970s my parents decided to sell it to him rather than continue receiving the $50 per year lease rate, but they retained the mineral rights. Family gossip indicated that Standard Oil had found evidence of shale oil on the land back in the 20s, but it was too expensive to process out at the time.
Fast forward to yesterday, I get an email from a gentleman representing Fairways Exploration and Production, LLC who offers me $65 per acre 5 years lease and 15% royalty should anything be taken out of the property.
My questions are as follow:
- Has anyone dealt with Fairways Exploration and Production, LLC? Are they legit? Their website seems genuine, but I would like to know if I am getting involved with a respectable company.
- Is $65 per acre a reasonable lease rate in Northwestern Montana?
- Is 15% royalty a reasonable rate, or should I hold out for more?
I would tremendously appreciate any input that you may offer!
Greg:
Can you provide your mineral area description: (Township/Range/Section). Looking at the map of Pondera County, there are a few active wells (oil/gas). The proximity of your minerals to active wells will be a major factor in the bonus amount. I would not negotiate a lease for more than 3 years. The 15% royalty would be low for the Eastern MT area but might be the norm for this area due to the lack of activity.
Good evening, Charles!
The area is range used for cattle grazing, but beyond that I do not know the specific location. I did notice that the royalty rate was lower than Eastern MT, but it seems in line with the far Northwest of the state, and, as you said, I suspect that is due to the lack of activity.
charles s mallory said:
Greg:
Can you provide your mineral area description: (Township/Range/Section). Looking at the map of Pondera County, there are a few active wells (oil/gas). The proximity of your minerals to active wells will be a major factor in the bonus amount. I would not negotiate a lease for more than 3 years. The 15% royalty would be low for the Eastern MT area but might be the norm for this area due to the lack of activity.
Greg:
What area of Pondera County are the minerals located (West, North, South, East.....NW,SW. etc.) If I had an idea about what part of this county the minerals are located, I could find out if any activity is in the area.
Greg Walker said:
Good evening, Charles!
The area is range used for cattle grazing, but beyond that I do not know the specific location. I did notice that the royalty rate was lower than Eastern MT, but it seems in line with the far Northwest of the state, and, as you said, I suspect that is due to the lack of activity.
charles s mallory said:
Greg:
Can you provide your mineral area description: (Township/Range/Section). Looking at the map of Pondera County, there are a few active wells (oil/gas). The proximity of your minerals to active wells will be a major factor in the bonus amount. I would not negotiate a lease for more than 3 years. The 15% royalty would be low for the Eastern MT area but might be the norm for this area due to the lack of activity.
Greg,
I've checked my sources and I have not found anything bad to report about Fairway Exploration & Production, LLC. They are not a company that just buys leases and flips them. They are actually in the exploration and production(E & P) business. Good luck on your venture.
Clint Liles
Greg,
Fairways is a privately held company that has been in existence for quite a few years, in the Gulf of Mexico. About 4 years ago, the owner wanted to start moving out of the Gulf to onshore. The Texas Gulf Coast was their first exploration, then to Alabama for a few wells. They have moved to the mid-continent as well.
The exploration team is full of talent and the President is all about relationships with landowners. Overall, a great man.
They can be trusted. I know pretty much the whole staff. Quality from top to bottom.
Outstanding! That is what I wanted to hear!
Buddy Cotten said:
Greg,
Fairways is a privately held company that has been in existence for quite a few years, in the Gulf of Mexico. About 4 years ago, the owner wanted to start moving out of the Gulf to onshore. The Texas Gulf Coast was their first exploration, then to Alabama for a few wells. They have moved to the mid-continent as well.
The exploration team is full of talent and the President is all about relationships with landowners. Overall, a great man.
They can be trusted. I know pretty much the whole staff. Quality from top to bottom.
Best,
Buddy Cotten
Mineral Manager
Greg,
As Mr Mallory posted, the specific location does matter. So the following may, or may not, be relevant.
I don't know anything about that company. Though last year I was offered $50 with 1/6th for minerals just west of Conrad. So your offer may be fair, though ask for 3/16th royalty (18.75%), and try to stand firm on at least a 1/6th (16.66%) rate.
For what it's worth, up near Browning (in Glacier Co, next county to the north) offers are in range of $200 to $300. However, that area has had some active current drilling activity with modest producing wells. If that activity begins to move south you may see higher offers in a year or two. However, that is never a certainty. So if you're comfortable with this offer try for better royalty. Then carefully read their entire lease before signing anything, and be sure to have payment in hand before giving them your signed lease. Good Luck.
Thank you for the excellent guidance. The contract is in the hands of my family lawyer, and I have sent this site to her attention. You have been a huge help, all of you. I look forward to being active on this site in the future!