Received an offer to lease northwest of Brenham, Texas Washington County


#1

Hi All,

First of all, thank you for your input. This is all very new to me and I am looking for any assistance I can get. My family recently discovered we have the rights to about 80 acres located in the E. Allcorn Survey, Abstract No. 2 in Washington County, Texas.

The land man (Acaval Land Company) representing Blackbrush Oil and Gas sent an offer to purchase a paid up gas and oil lease.

Terms are as follows:
Oil and Gas Lease Bonus $500 per net mineral acre
Primary term 3 yrs
Oil and Gas royalty 22%

My extended family leased the adjacent lots some years ago for $800.

This is probably a stupid question but does “Oil and Gas Lease Bonus” mean an up front starting payment?

Does anybody have any idea if these terms are fair or any insight into the area and these types of arrangements typically look like in the area?

Terms include:
“Paid Up” lease

“Subject to the proportionate cost of transportation, excise taxes,” (22% of net proceeds)
I think this means they aren’t offering a “cost-free” lease

There are other terms I really don’t understand so any advice about things to look for would be appreciated.

Thanks so much for the assistance!


#2

First of all, IMO, 80 contiguous acres is not a small number. You have some leverage. I would require they take all of it in any pool created. Don’t let them chop you up.

Yes, the “Bonus” money is up front per acre for signing the lease. You should trade a signed lease with a check - at the same time - not one before the other. It will be taxed as regular income, so be prepared come tax time.

That is their standard deal, I think. Sounds like the one I got. There should be an addendum which isn’t terrible, but isn’t great. I did not sign/would not sign it as is. It is not cost free. They will negotiate, but you should not be in a hurry to sign anything. I would be happy to sign with Blackbrush, but they are not the only game in town. There is leasing activity in your survey. At this point, I’m interested in the results of their first well in Washington Co which should be released in the next couple months. It was drilled (I think) in December. However, sometimes waiting doesn’t work out.

If your extended family used a lawyer to draft their lease, get a copy of it for a guide. If not, ask Blackbrush to pick up the cost of your lawyer to work on a lease. These are legal documents that can last for 30+ years. And if you own the surface, it’s doubly important to have a lawyer.

Sounds like you are in a good spot. Take your time, keep asking questions if you are not sure, and learn how to use the TX RRC website. Negotiate the lease first before the bonus money gets in the way of your thinking. It’s my belief, if they want me, somebody else will want me.


#3

Thank you so much for your input, Boris

We really have no idea what we’re doing here so I appreciate it.

Were you able to get 22% cost-free?

-Addam