Question about Lease Bonus Rates and Royalties in Lea County Sec 30

The full location description of my mineral rights ownership are:

Sec 30, SW Township 9, South Range 35 E. My possible lessee said that they are wanting to to do work in the Central Platform Basin, with horizontal drilling in the St. Andres shale play. I have been offered $500.00 per (net mineral acre) as a lease signing bonus and production royalty of 25%. I told them that I would like a Pugh Clause be put in this lease agreement. They said that they would do that but it will need to be a lease that they always use.

If anyone knows of any activity around my property Sec 30 and knowledge of current lease bonus and production rates I would appreciate all the help I can get.

Mike M.

What state?

New Mexico.

Thanks AJ. Any information is greatly appreciated. Even though The Shafer Lake N. field is in Texas from what I deducted when reading my Google searches. My property (from a birds eye view) is west of Hobbs, N.M. going out to where Highway 180 and Highway 62 make a split, then I need to go 6 sections down from the split and 7 sections west. That is the general area of where my mineral rights are located (according to a person at the Lea County tax assessors office). The San Andres Field must cover a pretty good spread of land. This could be a distance of 40 miles or 50 miles (western Andrews County, Texas to maybe 10 miles west of Hobbs, New Mexico. The landman representing the lessor said there hadn't been much activity in this area of the San Andres, Central Platform Basin. What I really think I need is someone on my side such as a reputable landman that knows this area of Lea County and the San Andres Field.

With the horizontal drilling technology it sounds like much oil & gas can be extracted from below even though my property could be surrounded by many vertical wells that are tapped out and plugged.

Thanks again. Have a great holiday season.

You are welcome, Leo Morgan. This is an interactive NM map with sections:

Check out this video: "Hart Energy spoke with Terry Dobkins, president and CEO of Elk Meadows Resources, about how horizontal drilling is reawakening this historic play."

See San Andres HZ info in these Ring Energy presentations:

Do you mind sharing the name of the oil company with whom you are negotiating?

We have producing property in Andrews county (Texas) and Lea County (NM). Very small interest in Andrews but they made two wells there (horizontal) so I don’t think they are wildcatting. 25% royalty is pretty standard in west Texas and eastern NM but the $500 seems very light to me. I’m not leasing less than $2500/acre in the area, no matter what the company offers. A vertical and horizontal Pugh clause should be acceptable to anyone now, with a depth of around 100 feet of initial production zone. Be very wary of their “standard” lease, which likely is based on the old Producers 88 form, which means they could developed a hotel and beachfront property as well as toads and anything else they want to do. Check the state of Texas General Land Office lease for ideas to compare terms. The state obviously has more leverage, but is protective of the lessor rights more so than the 88 lease which is all in favor of the lesser. The most certain way to protect your rights in a lease is to check with a local oil & gas attorney who works in that area. I don’t know how many net mineral acres you have, but if it’s 50 or more, a good attorney would be a good investment. I’m not an attorney, and don’t use them often, but I have some experience with the language, and don’t believe I get ripped off too badly :slight_smile: Unfortunately, most lease language has been around for a long time and the phrasing is probably dealing with court cases on those points. A good attorney can protect you from the land mines. I have learned that you can say no to the first guy that approaches you–they will NEVER offer their best deal up front. These are your minerals and they want them. Hang tough, but be smart