Anyone know what the going rate per acre is for a mineral lease in Sabine County Texas? We have been offered two drastically different amounts by two different landmen. The group with the higher offer has not put it to paper though and we are wondering if this is some sort of ploy to get us to hold out for their actual offer which might end up being much lower.
There is no accounting for why offers are made but you should focus on the lease language and how the lessee's promise to calculate and pay your royalty is documented. With good production, the difference in royalty protections could be a huge multiple of the difference in bonus offered per acre. Understand that landmen are obligated to others in a lease transaction and only the wording of the lease counts after it is granted.
Thanks Gary. I'm sure that what you are saying is very true, however in the past we have had many leases that have tied up our mineral rights and amounted to nothing more than a tax right off for the oil company. No one has ever actually drilled on our land so the bonus per acre has always been our focus. The companies that have recently contacted us have indicated that they plan to drill. I plan to have an attorney review the leases when they finally appear (if they actually do) to make sure that we will be getting the best deal on the royalty. I guess I am just baffled at this point as to why two companies would make such vastly different offers. One company has offered us $300 per net mineral acre and one company has offered us $1,000 (over the phone but not yet on paper) per mineral acre. We have not heard back from the company with the higher offer and I am starting to wonder if they just told us the $1,000 figure to keep us from leasing our land to anyone else until they decide what they want to do. I was wondering if this was common practice.
It is very common practice in today's market for a "land company" to take leases in a new hot area with the sole intent of turning there position at a profit. You may have helped that speculative effort through your leases in the past but without an understanding of the geologic potential for your minerals all you could do is "rent" your minerals for someone to play with during the term of the lease. There are many discussions on the Forum about choosing your operating partner in a lease. Some are real explorations companies of proven results and some are trading on the greater fool theory. Many members have a practice of leasing for short periods of time in order to take advantage of a market and enjoy some income for the short term. The more you know about the geologic potential of your minerals the better decisions you can make about structuring a lease and with whom to lease. If you have considerable acreage, it is all the more important to have a good idea as to what you need to lose control of your minerals for the promise of a royalty then protect the royalty in a lease.
Read some of 6th generation Texan, RW Reynolds, and Mallory's posts on the Forum to see what they have learned the hard way about leasing. You will find that you can not dictate the business plans of the lessee but you can make certain it is compatible with your plan.
Gary Hutchinson
Minerals Managemnet
Thanks Gary. How do I go about finding out the geologic potential of my minerals? Do you know anything about Forestar and W & T Oil as far as whether they are exploration companies with proven results?
I sent a "friend" request for your legal info. I will check it out and get back to you with my impressions on the potential and companies.
Gary Hutchinson
pballay said:
Thanks Gary. How do I go about finding out the geologic potential of my minerals? Do you know anything about Forestar and W & T Oil as far as whether they are exploration companies with proven results?
We recently signed an O&G Lease with Devon on 101 acres on Route 1 (Bronson Rd) South of 103. $1000/acre, 25% royalty. We did not try to negotiate above the $1000, we rather concentrated on other terms like not paying any of the costs for production, transportation, etc.
We also have mineral rights on a portion of 190 acres West of Geneva North of 21 on FM 3448. We have not had any offers for that area.
Phil Newsom
That sounds like the kind of lease we would like to have. Someone did call us and make a similar offer but we have not heard from them now in over a month.
Does anyone know about Four Star Oil and Gas LLC? We have an offer of $350 per mineral acre and 25%. The land is in the J.I. Pifermo Survey, A-47.