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 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