My mom has been contacted by Shale Exploration/Apache Drilling. Here's their offer for her mineral rights in Daniels County:
$302 an acre to lease 712 acres for 5 years with a 5 year option at $600 an acre.
I think the 5 year perhaps should be 3 years, and they didn't address an annual rental during the lease period. (could be 25-50 an acre during the duration of the lease). But honestly, we know very little about all of this, so I would love to get your opinion. Are they low-balling us? Is there anything that they didn't address? Is Shale Exploration a reputable company?
Also, we would like to talk to an attorney about this. We would prefer someone here in Seattle. Anyone know of a good attorney who handles such things?
Hello from Daniels Co Mt... Ms. Dyer , we have been negotiating with SE for about a year now .. what I would like to contribute is I totally agree with you on the 3 year lease.. but if you look at the lease agreement if you go with the lease they have 365 days to decide it they want to take the second part or options years ... wow, so this means to me they can tie you up for 11 years.. Ridiculous... My opinion... . A good attorney to talk to is a man by the name of Austin Knudsen, works at OTOOLE law firm in Plenty wood Mont. give him a call he is very versed on oil and gas leases..I do not have the number close but he would be a good start for some sort of overview on whtas going on... Good luck
I don't think they are "low balling" you. Daniels County is off the western edge of the Bakken play. There has been virtually no drilling yet and little leasing interest prior to Shale Exploration's arrival. From that perspective $302 per acre is a fair offer for a five year lease. At this point I don't know if anyone if offering 3 year leases there. You didn't mention what royalty amount they're offering. That too makes a big difference if they're "low balling". In general offers within Daniels County; 1/8th (12.5%) is lowest, 1/6th (16.67%) is average, and 3/16th (18.75%) is top end.
However their 5 year + 5 year offer is a ten year commitment on your part. They may choose not to renew it, so it might only run five years but you must still commit to allow ten years now. Then as EGL points out, Shale Exploration's standard lease includes a paragraph giving them an extra year (the 365 days) beyond the stated five. You don't want to allow that in a lease. As far as I know Shale won't budge on the 5 year + 5 year option. However they should remove the extra 365 days provision if requested.
It will take several years to learn if the county can produce and Shale knows this. That is why they insist on the 5 year option to extend their lease. If the play gets hot they don't want to re-negoiate all these leases again. None the less, I would discourage anyone from accepting a lease for ten years. It is too long. Though if their royalty offer is good, and Mom could use the cash, she has enough minerals to make this tempting. Seek out legal help and take your time. While I don't know the attorney EGL recommends, I do know that his Plentywood law firm should be as well versed on current offers there, and oil & gas leases, as any firm you'll find. Good Luck.
365 days to decide if they want to pick up the option ? What a scam! 5 years should be more than long enough for SE to determine if they want to pick up an option or not.
It really depends on the area you're in as far as how far you can negotiate. They probably have certain area's that are top tier and others that are not. As stated earlier, Daniels is also unproven so 300 is a pretty good pnm price. I would talk to an attorney in the area as they would know what kind of offers are floating around and how much you should negotiate. Sounds like Apache is going to be drilling soon so your minerals could go up in value or if its a bust they then they wouldn't be worth the dirt their under. Good luck.
Hi Stefanie, There are other companies that are offering 3+3. And with what we have been finding out is when the lease drops in years the amount usually drops by $50.00. And they have been offering up to $450 a acre. but the back end of your lease is a good amount. They are going to be drilling I think it is 3 wells?? And are suppose to be starting this comming month? They are drilling all well's on State land for now. We talked to an attorney in right in Scobey. We did talk to one in Pearless but he would not answer a question for my husband before we agree'd to sign him. So just be careful of who ever you talk to that they have your best interest in mind and are not just seeing $$ signs....... Shale bought out our old lease, but at the time they bought it, it had already expired. And our dealing with them has not been very good, they are a bit flaky... Watch their lease agreement and all the ADDENDUM's~ cause they will tack them on... they have a sister company called AUGUSTUS MAY ENERGY, INC. they have a lease that totals 7yrs. I think it is 5+2??? But what ever you do just know that there is other companies besides Shale. Best of luck to you
My experience with Shale was good. They promptly returned phone calls, answered all my questions and were very professional all the way thru. When we signed, I had check in hand in under a week.
I called my attorney to check on this. He says that the 365 day extension is only if they drilled on part of your minerals. It's the Pugh clause. If they drill on part of your minerals, at the end of the five years, they have 365 days to begin drilling on your other minerals or you can lease to some other company. I think this is a good thing because it means that they drilled on some of your minerals.