My elderly (but very healthy) mother has a 5nma lease in Reeves County Sec 301 that was originally leased 5 years ago. It was renewed for 2 years in 2017, and they want to extend the lease for another 2 years. To my knowledge, they have not started any drilling yet. I’ve asked if they have any intention of drilling soon, but they will not answer the question.
The last 2 year extension paid $13K, but I’m curious about 2 things: 1) Should she keep renewing the lease and, if so, what is a fair per nma price? 2) Should she decline the renewal and let the lease expire - with the possibility that someone else will offer to lease with the intention of drilling soon. Things to consider: My mom has lived a very humble lifestyle and has never had much in the way of monetary things - current income is $800/mo SSI. This may be her only opportunity for a substantial gain that will see her through the remainder of her life a bit more comfortably.
I’m not an expert but I am a mineral owner in your general area. Unless the original lease was negotiated by my expert oil and gas lawyer, I definitely would not sign an extension. IOW, if I had pretty much signed the lease handed to me by the oil company, I’d be verrrrry happy to get out of that lease! Oil company leases naturally favor the companies, often bigtime.
Even if that lease had been negotiated by my lawyer, I still might not want to extend it. Some important legal things have changed in the last few years! You want an expert to make sure that your original lease, or a new lease, has precise language to keep the oil company from deducting expenses against your production. The wordage that used to work in leases often no longer does and mineral owners are suddenly finding that substantial sums are being deducted from their oil revenues.
In addition, bonuses have gone up quite a lot in your area in the past five years. Bonuses can go from maybe $8,000 to $12,000 or even $15,000 an acre now, three-year lease, 25% royalty.
We never negotiate a three year plus two year lease. The owner never wins with that scenario. Longest we will go is three years. But leases can be as short as a year (with lower bonuses, of course).
If you need a good mineral lawyer, we’ve used Wade Caldwell and been very happy with him. He is listed on this site somewhere. Best luck to your grandmother!
Ms. Liz_M gave you good advice! I am a longtime partner/owner of mineral rights that are currently producing and I had a very good lawyer guide me, help me, and actually composed a very comprehensive, I hope, lease agreement back in the seventies.
My lawyer back then has retired a number of years ago so we have a new lawyer now. What Ms. Liz_M stated about the current situation with old lease agreements is absolutely what is now going on in the State of Texas! dpdionne - get a lawyer and allow the lease extension to expire.
Negotiate from there!!
Great advice Liz!
Never sell your minerals, but in your mom’s case, if the bonus is 15K an acre, she possibly could get an offer to sell for 45K an acre, for a total of 225K. If they dont drill it for another 5+ years that money might help, don’t forget uncle sam will take a bite out of that as well.