I was told I should ask my question on the Hughes County forum.
United Land Co sent us a potential oil and gas lease agreement. Section 22-Township 6 North, Range 8 East, Hughes County, OK. Containing 80 acres.
We have the mineral rights.
They are offering $250 per acre for a 3 yr. term bearing 3/16ths royalty. 3 sisters own 1/2 and step mother owns other half.
Is this a reasonable offer? Thank you,
Yes. Just make sure you read the fine print.
Cindy, this looks quite reasonable. In the fine print, strike the part of the clause that says that you all, the lessors, will "warrant and agree to defend the title to the land herein described." You want to strike that out, and all of you initial it, because if a court case comes up where some company says that the lessee (the producers you're signing with) shouldn't be drilling there, you don't want to be liable for the court costs for defending the lease.
Who are they leasing for? Not only did I strike the warranty clause, I added an exhibit assuring it was a gross proceeds lease. NO DEDUCTIONS!
United Land has the cover letter with all the specifics, however, the actual agreement we are to sign has Silver Creek Oil and Gas out of Irving, TX. In the lease itself it states "ten dollars" cash and not the $250. I contacted United Land and he said that was common and they abide by the cover letter? Is that true? He explained it's done that way so it's not public knowledge regarding their offer.
I appreciate all of your input. Thank you
I strike out the warranty clause then do we add the the "gross proceeds....no deductions" at that place on the lease or at the bottom of the lease? Thank you again....Claudia and Donna.
Cindy: Below is an example of what I make a part of my lease. FYI, I have had good experiences with both United Land and Silver Creek. With respect to your question about the cover letter and the "ten dollars," what United Land told you is correct. Good luck! Enjoy the journey! See below.
NO DEDUCTIONS: Lessor’s royalty interest shall not bear any part of the cost or expense of production, including but not limited to the following; separation, dehydration, compressions, transportation, trucking, processing, treatment, storage or marketing of the oil or gas produced from the leased premises or lands pooled therewith. Processing and transportation charges may be deducted only if they are reasonable and necessary and if they enhance the value of an already marketable product. In no event shall the Lessor be paid a price more or less than the price paid to Lessee by a nonaffiliated purchaser, provided that Lessee and its joint interest partners alone shall bear any of the costs set forth above that are required to produce oil and gas and other minerals to get them in marketable condition.
2. SHUT-IN ROYALTY LIMITATION: The Lessee may extend the primary term of this lease by paying shut-in royalties only if no pipeline runs near the leased premises and a prudent operator would not elect to build its own gathering line. The payment of shut-in royalties will extend the lease only for 18 months. This lease will terminate unless the Lessee begins selling oil and gas in paying quantities before the expiration of the 18-month period.
3. CESSATION OF PRODUCTION: If, at the expiration of the primary term, production shall cease for any reason except for shut-in gas wells as described in the preceding paragraph, this Lease shall terminate unless the Lessee resumes production in paying quantities within 120 day after such cessation.
Thank you, Claudia. Really appreciate your time and knowledge.
Claudia....one last question regarding the 3 additions you have above for the lease. Where, on the lease agreement itself, do we add these? Can we add at the end of the lease..... below all of the notarized signatures? Sorry for bothering you again. I am meeting with my sisters tomorrow. Thank you so much.
Cindy: I create an Exhibit “A”. Try telling United Land you want those items included & let them write the exhibit … I’m out of office for the holiday weekend. Who are you working with at United?
Randy? He is good as gold.
I just leased 2 more tracts with him last week.
Ask him for a “favored nations clause,” as well. I didn’t get one, but am going to get more aggressive about it! Basically it means if they pay another royalty owner more, they have to pay you the same! I pled point orders and saw where they pooled owners at 1/5th with a $50 lease bonus & an overriding royalty! Go for that is you don’t need the cash up front & are willing to take the risk. Just my opinion.
Not “pled.” I pulled pooling orders.
Would have to go back & look. I think I asked for 18. May have gotten 24. Shut in is the length of period of time the well is not producing. Sorry for typos. On my smart phone