Melissa, were you interpreting the bonus payment being paid upon a well being drill from the lease form or was it spelled out in an offer letter? I’m just curious because I’ve never seen an offer of that nature. When you mentioned a $1/acre, it sounded more like a Shut-In payment on a standard form.
APA
If you ask the broker, which sounds like yours is R&J Graham Energy, to produce an offer letter that describes the specific time frame that they will pay the lease bonus, and the total amount of the check, they should be agreeable to this. If you want even more protection, you could hire an escrow service, but I think that would be overkill as it is well established that R&J and the other Apache brokers are paying the bonuses. As to your other question, the oil company cannot enter the premises after the lease expires. A lease will last beyond its primary term in accordance with the terms of the lease, and that is typically for so long as there is oil and gas production or operations occurring, or a well is shut-in and shut-in royalty payments are being administered. You are being compensated in those scenarios by the royalties you are receiving. There are so many other components to the oil and gas lease to take into consideration. If you are not familiar with the nuances of pugh/retained acreage clauses, warranty of title, etc…then at the risk of sounding like a broken record, you need to hire a professional.
Melissa, I second Linton Tomlin’s comment! Wade Caldwell did a great job for me when I was in your shoes some months back. The fee is money well spent. In my case, he got me Much Better terms written into my lease and 3 Times the Bonus originally offered.
Best of Luck.
I have a question that most likely will seem pretty dumb…when folks talk about a lease extension i.e. for 3 years at a cost of $2,000 per mineral acre, is the price per mineral acre then $2,000 for the 3 year lease period or $2,000 per acre per year? Thanks
Looks like you hit submit on your reply just before I did, but at least it confirms the $800/ac. It sounds like with $800/ac and a 25% royalty, they’ve offered you competitive terms. As for the royalty schedule, there are laws in Texas to protect mineral owners that create timelines for when an operator must pay.
I was offered a bonus of $800.00 per ac and 1/4 royalty.
The lease terms indicate the bonus would not be paid till the lease is up and if a well was put on the property. The lease term was told to me to be either 2 or 3 years. The lease document says 3 years with an option for 5.
No bonus offered for lease extension, only the sum of $1.00 per ac.
It indicates that no bonus will be paid unless a well is drilled in the initial 2 year period.
And, that the oil company can use the land for storage after the lease term is used up as long as they want to use it. No compensation is offered for this. Also, no conclusive plans for remediation of surface when they are done.
Alex, that is in the same general area as Melissa’s property that is being discussed below. $800/ac is the last I heard. Is Cove Resources the lessee?
APA is Apache. Cove Resources is one of their brokers so I was curious if that is who was taking the lease.
Melissa, if Apache has offered you $800/ac, and you believe their offer to be contingent upon a well being drilled, then as was mentioned below I think there is a decent chance you are interpreting shut-in royalties to be the same as the bonus payment. You can certainly wait for a better offer to come along, but since that is a highly speculative area with little to no competition, you run the risk of remaining unleased and Apache moving forward with the drilling of a well, and Apache treating you as a working interest owner. If this were the northern or eastern part of the county, I’d say by all means hold out for a better offer. Given how speculative this area is, I think you improve your chances for realizing the most from your minerals by leasing.
Something else to keep in mind, when the lease says “Lessor, in consideration of Ten Dollars (or some other small amount) and other valuable consideration, in hand…” that is boilerplate language that is not describing the actual bonus being paid. Your offer letter should describe the bonus amount and time frame for being paid. You typically only see the bonus payment listed on the actual lease form when the State of Texas owns the minerals. I don’t mean to sound insulting when I say this, but it appears you may be new to the world of oil and gas leasing, and when that is the case, it is ill-advised to make decisions on these types of matters without professional guidance. This is a great forum for sharing information and advice, but you should give strong consideration to hiring an attorney or landman.
R&J Graham Energy is also a broker for Apache, and I know with certainty they are paying the agreed upon lease bonuses shortly after they receive the executed lease.
Melissa, I second the vote for Wade Caldwell. This lease could be with you for the rest of your life so you definitely want to get it right!
Lease bonus is typically quoted as an so much per net mineral acre for the primary term of the lease, so in your example $2,000/nma for the 3 years. If the offer includes an option to extend then an additional bonus payment of the same total amount typically would be paid for the option period even if the option is only for another two years. That may sound tempting but remember it’s a one-way option and unless the value of the lease isn’t high at the end of the primary term the operator won’t use the option. I’d negotiate for the shortest primary term you can and have no option to extend so you can keep the pressure on and be in a position to renegotiate the lease again at the end of the term.
I was offered a lease agreement that appears to say I would see the initial bonus only if a producing well was drilled and used,after lease extension $1.00 an ac for 2 years. Is that a common kind of thing?
Melissa, I have no idea if that is a common thing, but I would never, ever sign a lease like that!!
Melissa, that is an appalling offer. It sounds like it came from a lease flipper that doesn’t have enough money to actually pay a lease bonus. What is the legal description of the tract? I can search the records and see if any other leases pull up. If the other family members signed a lease with those terms, I feel very badly for them… Fortunately, you are not bound to signing with the same company they do.
Reeves County A-464/Section 39/Block 13/H & GN RR
I was offered $800.00 per ac bonus and 1/4 royalty. No schedule for royalty payment or right to inspect books etc… and nothing about how the surface would be treated.
anyone know the going bonus rate for a 3 year 1/4 royalty for minerals located in and around Abstract No. 4457, Block 13, Section 120, Reeves County
Yes , my general feeling was the offer was not good, a lot of chance I will never see a return on it. I can wait for a better deal to come along, that is not strictly to the advantage of the oil company.