Reeves County, TX lease rates

Oil and Gas Leasing Help
1

Hello:

I've found out through internet searches that bonuses in Reeves Co. are as high as $1,500 to $2,000 per acre with 25% royalty for new leases. Delaware Basin wants to extend a lease with me that ends next month. Three years ago, they leased these minerals for $300 per acre and 20% royalty. Now they are offering $300 for 1 year or $400 for 2 years. I've told the landman what I've read/heard about current market rates, and he sort of laughed and said that they could do the 25% royalty, but that the highest they've paid is $850 per acre. He implied that, since they control so much of the land around my land, they aren't really subject to what others might be paying. My acreage is in sections 1, 2, 11 and 12, block c5, PSL Survey, which is right in the middle of the Lyda Family ranch that was recently purchased by Delaware (???), or so I'm told.

So now I have my floor of $850/acre and 25% royalty (I think), but I need some help on a few items:

  1. How can I determine the location of the acreage that is getting top dollar ($1,500-$2,000/acre)?
  2. Is it advisable to not negotiate with Delaware until the lease is expired (next month) and simply try to sign a new lease?
  3. Most importantly, if I shop my minerals around to other companies, could I possibly get more bonus money? I'm not sure I understand why another company would lease my minerals in the middle of all this acreage that is already leased by Delaware.
2

Hi, Patrick -

1. Don't worry too much about locating the acreage getting higher bonus' than you've been offered so far. The location of acreages like that is always fluid and the higher bonus' may flow towards you over the next few months.

2. You say a company named Delaware Basin offered you $300, then in the same conversation bumped it immediately to $850? Not to scold, new pal-o-mine, but did that not indicate anything to you?

I'd advise you to stay in touch with them, as you may decide to stick with them in the long run, but not to accept any offer until your present lease has expired. And even after that, take your time about accepting any new offer while you explore the different avenues open to you.

3. Yes, you could very possibly get a higher bonus payment if you shopped your lease. I would even go so far as to say probably, although it might take a few months to "let nature take it's course", so learn patience.

Another company that would take your lease could simply sell your lease "back" to Delaware Basin for a profit or end up being partners with Delaware Basin in any future development of the subject properties.

Just so you know, if Delaware Basin only focus' on one certain type of drilling (many companies only like to drill to certain depths or formations, while others like deeper or shallower depths), they may at some time in the future assign or farmout the "deeper rights", for example, of their leases to another company.

You will probably find that a number of Delaware Basin's leases in the area may be expiring over the coming months. Your's was probably not the only land or interests they leased "last go around" and unless all those other leases are now in producing units (HBP = Held by Production), they will be coming open soon just like yours.

As I advise everyone who has been approached by a company to lease their land or interests, I very strongly suggest you ask your attorney to help you negotiate the lease. If you don't have an attorney or the one you have is not experienced in oil and gas law, ask your neighbors who they are using or check with NARO (the National Association of Royalty Owners) or similar groups for attorneys in your area.

A little legal expense now may save you a lot of regret later. Some attorneys may even represent you for a portion of your newly negotiated bonus payment.

I haven't seen where the Mineral Rights Forum has set up a special page for Reeves County, but you might find one for one of your neighboring counties you could venture into - the "play" you are in covers some dozen or more counties.

Hope this helps -

Charles

Charles Emery Tooke III

Certified Professional Landman

Fort Worth, Texas

fieldlandservices@gmail.com