Section 30

This is a follow up on my posting about Section 21. My brothers and I also received an offer for Section 30-T8N-R9E (0.8 net mineral acres) from Stephens Land Services (Norman, OK). They are offering a three year lease, $350 per net mineral acre, 3/16ths royalty, and "an option to extend the primary term an additional two years upon remittance of an additional $350 per mineral acre." I have not asked to see the actual lease yet--this information is in the letter. Judging from the responses to my posting about Section 21, I'm thinking that this offer may be too low also. Any feedback would be appreciated.

Jane J.

Do not do the two year extension! Again, ask for what their highest offer will be at pooling. Most first offers are low. Ask for 1/5th option as well. Ask for a copy of the lease and then it will be time to negotiate because the original terms in the lease will most likely not be in your favor and you need to make changes.

Thanks so much for your advice on this. You've clearly explained why it would be best to not have a two year extension.

Jane J.

In my experience, most leasing goes up over time, so you do not want to be tied to a five year lease that may trap you in lease terms that are low. If they do not drill in the first three years, you want to be able to negotiate with whomever is the best party in that new time frame and not be stuck. Sometimes lease prices go down, but mostly up, so I never lease for more than three years. If I know a well is going to be drilled in the near future, I don't even lease for three years.

That makes good sense to me. At the risk of betraying further ignorance, how do you know if a company will be drilling a well soon? Is this something that the Oklahoma Corporation Commission or some other entity keeps track of? By the way, I ordered the books that you recommended.

Too low Jane!............Leta