I have been offered $10.00 a year for 5 years for 80 acres with 1/8 th royalty. I have been advised that 5 years is to much, should be 3 years and ask for 3/16th. My question is, is $10.00 a year to low an amount for mineral rites lease in Converse County Wyoming?
Gary
I think $10 is too low for any location. Be sure not to lease to a speculator/investor. People may say the value is in what the market will bear, so in that case I say wait.
Wilson
Gary:
I would not even consider leasing for $10.00/yr. or $200/yr. until you have researched the future potential of the area in regards to oil and gas exploration. If someone is offering to even lease the area, someone has heard something that sounds positive for future developement. Even an investor/broker interest is an indicator that something might be happening in the furture. Read, study and listen to what is happening in your area long before you make any decision to lease. And yes, 3 years would be the max. on a lease.
Gary, think of it this way, if you wind up in court because you are bound into a lease, there had better be enough money in it to make it worth your while. Between my brother and I we have signed 3 leases, have wound up in court over two of them and I have had to threaten to sue to get the third lease recinded. Make sure what you get is worth your while. In my opinion it will probably cost you $800 in legal fees for your lawyer to keep you from getting taken to the cleaners.
Gary:
I'm not sure where Converse county is.. But if someone is offering $10.00 per year for 80 acres.. That is rediculous.. That's just $50 to tie up your rights for 5 years.. They must mean $10.00 per acre or $800.00 per year.. or over 5 years a total of $4000.00 That equates to $50 per acre over 5 years..Not great but not awful. ... My family... a group of elderly folks recently took $40 per acre for land in Weston county... about 21 miles south of Newcastle... This offer was , in my opinion, quite low .. but the old folks believed a bird in the hand was worth several in the bush.
We got the royalty payments up to 14% in case anyone hits anything.. But 14% instead of 12% is not a huge deal.. as many areas in the country.. the numbers can go to 20%.. i.e. North Dakota. But the thing to understand is it costs the leasing company nothing to increase the royalty number as that would eventually be paid by the party that develops a well.
So to answer your question.. $10 per acre is way low.. and the number should be somewhere around $40 per acre or higher.. 5 years is to long but with the current hang ups with government the companies need some time to get permits and rigs available.. etc.. 3 years would be better but I doubt the companies will go for it..
Good luck,,, try to talk to neighbors who own rights and see what they are hearing.
Gary, I agree with all those who replied before who said $10/yr. is too low -- way too low. And 5 years is way too long as well in my opinion. I don't know where your mineral property is located in Converse County, but the County is drawing a lot of attention right now, some areas more so than others. Know who you're dealing with and check them out.
Gary, as everyone else stated you should never lease at $10 per acre with a 1/8th (12.5%) royalty. I'd say that regardless of where your minerals are located. Though unlike Wilson I'd not be adverse to leasing with an investor/speculator, if their offer was attractive enough. Sometimes those who want to participate will offer a superior deal to what the oil companies will show. Though that is not the case you've posted.
As to Converse Co, WY; Currently portions of this county are as "hot" as any place in Wyoming. In those areas several oil companies have been actively trying to lease minerals for the past two years. So if this $10 with an 1/8th is your first offer it suggests your minerals are quite a distance from the area in play. Somebody, probably a speculator, is just fishing outside the edges of the play to tie up minerals on the cheap. They're willing to risk $800 on the chance the current play will extend your way before their five year lease is up.
Rather than tying up your interest for $800, the best thing to do is wait to see if the play moves your direction. If it comes into "your" neighborhood, you might expect 3/16th (18.75%) royalty on offers of $200, $400, or $600 per net acre depending upon how close you are to their active area. On the other hand, if the play never moves your way, well then all you have "lost" is their potential $800 payment. That is the essence of your decision.
In the meantime, take a look at the State's website map to see how near/far you are from the current permiting and drilling within the county. Go to http://WOGCC.state.wy.us and search out your location. Good Luck.
Converse County, depending on where you are in the county, runs as high as $3500 per acre and with a high of 3/16ths. Low end is $300 and 1/8th.
I would consider responding and say you respectfully decline their offer to lease. I wouldn't even give them a reason, if they are serious they will be back.
That is a real low ball offer. I leased some minerals in Converse Co. about a year ago for $200/acre and 3/16 3year +2 option. Depends on where it is at, but no where in the county should you be leasing for $10/acre 1/8th. There are a couple of different plays in the county.