Section 136 Block 13 lease offer

Our lease is expiring in July. I’ve been contacted by Tall City to lease for one year. They expect to drill in August. What’s the going rate for this area?

The problem here is,

 Tall City wants to only extend the lease for one year.  There is two ways for them to look at this . . . . they get a limited lease extension because they are not sure they want to drill the well or . . . . . they want to get a limited lease extension because they want to limit the bonus amount "Up Front" and are willing to take that risk.  If I were you, I would take the attitude that I have something here for sure, but I really also want to see a well drilled.  I would at least require a $10K per acre to start and see what happens.  $10K is not a great amount for Reeves County Minerals and if Tall City jumps at that, I would tell them I've changed my mind and up it to $20K or $25K per mineral acre and see what happens.

I have checked the RRC and there are two wells on either side of us both are drilled by Primex. They haven’t contacted us. I was wondering if I should hold off for a while? Landman for Tall City has been pretty aggressive. My two offers are no where close to 10k.

First, Have you ever been to the property? 2nd, first, second, and probably third offers are too low for a Lease Agreement Bonus. It appears that you are somewhat familiar with the TRRC and that is a very good thing. The first thing I would check next is the two wells on either side of your lease. It is public information and can also be accessed at the TRRC. You truly need to know what you are dealing with, how deep these wells were drilled and completed, what formations are they exploiting, and if directional holes were drilled, what are their well tracks? If they are tracking on a line paralling your lease, you need to ensure that they are not already exploiting your mineralsk! I recommend you get yourself a qualified Landsman first and start researching an Oil/Gas Lawyer with experience in the area of your property.

Stephen Watkins