Reasonable offer in Pecos County?

My mom and aunt have received a lease offer from Honda Davis representing Alamar Ventures for their inherited mineral rights for a property in Pecos County. They haven’t been approached in years and royalties from the previous lease of a gas well dropped off in 2017 - at least from what I can tell. Trying to help them sort out whether to enter this lease. I have so many questions!

The lease offer is for 6 months and as long as oil and gas is produced as detailed in the lease, $500 per net mineral acres, 40 acres of land more or less around the well. 25% of production.

If the well is shut in for 90 consecutive days, and there’s not operations, the Lessee is paid $1 per acre at or before each anniversary of the expiration of said ninety day period … (and more legal language that’s hard to interpret.)

There’s also a lengthy “right to pool or unitize” clause which is seems concerning because it seems to give the Leese a lot of rights.

Here’s my questions:

Does the offer seem reasonable in general? Why do you think they suddenly are interested if production had been dropping off from 2017 to nothing in 2019.
Is there anything concerning about a shut in lease or is this normal. What concerns and questions should I have about pooling clauses? Do companies acquire leases just to get the pooling rights and why?

On a final note, my mom, aunt, and cousin own a small percentage of mineral rights but all the surface rights for 640 acres where the well is located. Should they request anything to be added to the lease to protect their surface rights?

I think you should be concerned that they might sign without having much understanding of what said lease allows. That surface rights are involved only compounds the potential risk, imo. Why would it not be in your best interest to have an attorney conversant with Texas oil and gas law review the proposal? Spend hundreds dollars now to make/save tens of thousands later? There are three Texas-based attorneys listed in this forum’s Directory of Service Providers for Mineral Owners.

All of you would be wise to band together and share the expense of a good attorney. Those with the surface acreage need extra clauses in their lease to protect them and best not done by an amateur. The draft mineral lease presented to mineral owners is rarely in their favor and needs a legal opinion for improvement.

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I spoke to the Landman today and it looks like some of our concerns can be negotiated. I’m going to research the need for more surface rights language and contact an attorney.

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I receive offers quite regularly and have found that production in the short term is usually more than the offer was. For instance, last week I received an offer for “2-3 times your last lease bonus.” the bonus was $6,000. Yesterday I received production check (first one) on that same land. It was for $15,000. I doubt I will ever sell at any price for the reason depicted herein.

Thanks. That sounds reasonable but my Aunt is on limited income and I’m trying to be cost conscious for her sake as well as my moms.

The six month term of the lease seems odd. Has another well already been drilled? Don’t miss signing a lease in pursuit of the perfect. Losing out on getting a bonus can sting for a long time. Delicate balancing act.

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Yes - there is an existing well that was producing up until the latest operator took over. The landman said that they believe this operator just let it go and put it in shut in mode because of lack of interest in the Pecos County area.

I guess we’ll find out with this new lease.

Have you found the land in question on the Texas RRC’s GIS Map Viewer and looked to see if a “new-to-you” well has been drilled? If the well you mentioned is shut in, and the original lease still holds your land, could it be a real problem for you to sign a lease with a different operator? Search the forum for “top leasing” and consider if it might apply. Also, could there be something in the original lease which is to your advantage? I hope others reading this thread will comment.

Hondo Davis contacted our family in January regarding a well in Pecos County that had previously been leased to a company called Gary Permian. Last year Gary Permian sold all (?) of its assets to an entity that named itself Sven Permian. Ben Bahorich seems to be the head honcho there. And Hondo Davis, a landman, is doing legwork for him.

Sven Permian has been trying to rework the wells whose leases it purchased from Gary Permian. Hondo offered us a 6-month lease for our non-producing well, with similar terms to C_Myers’s offer, but a lower bonus. For various reasons we decided to decline his offer.

Our well had stopped producing (under Gary Permian’s inept management) several years ago. With no production, our lease expired, and we made sure that GP sent us a legal doc stating this. (Which we then had recorded by the County Clerk in Fort Stockton.)

Sven Permian’s operator number is 831420. You can find all their wells on the Texas RRC Production Report page, searching under operator number. They did seem to bump up production for two or three of GP’s wells, and they are getting a lot of gas out of a well that GP drilled then never produced.

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Thanks! This is very interesting and helpful.

I’m curious to know why you didn’t proceed with the lease. We’re still trying to understand the risks involved with signing a lease as well as the pros and cons.