Shut-In Royalty?

Oil and Gas Leasing Help
1

What’s a fair shut-in royalty rate? I don’t think $1/Acre is reasonable at all & that it should be based on lost production somehow?

2

What state? I have recently been reading an old lease from 1989 (signed by my aunt) for over $2 an acre, so $1 is extremely low for today.

3

We negotiate our monthly shut in rate at 1/12 of our delay rental rate.

4

Texas, Thanks for your reply!

Nancy Mosley said:

What state? I have recently been reading an old lease from 1989 (signed by my aunt) for over $2 an acre, so $1 is extremely low for today.

5

Thanks Mr. Cotten! That sounds like a plan, provided the delay rental rate is fair - I think the delay rental terms in our lease are along the rate $1/Acre/ month - doh!

Buddy Cotten said:

We negotiate our monthly shut in rate at 1/12 of our delay rental rate.

Best,

Buddy Cotten

PLM-University of Texas

6

Ralpr,

You are welcome. Delay rentals are negotiable, like any other item in a lease. Our Rental Leases are generally either $75 or $100 per acre. On the very few paid up leases we grant, we use $75 per acre per year as a shut in royalty.

Equally important is how the shut in is paid, when, how and for how long each time and how many times. All of those items are negotiable as well.

7

Hello Buddy,

Could you please explain the difference between shut-in and delay ?

Thank you,

Randy



Buddy Cotten said:

Ralpr,

You are welcome. Delay rentals are negotiable, like any other item in a lease. Our Rental Leases are generally either $75 or $100 per acre. On the very few paid up leases we grant, we use $75 per acre per year as a shut in royalty.

Equally important is how the shut in is paid, when, how and for how long each time and how many times. All of those items are negotiable as well.

Best,

Buddy Cotten

PLM = University of Texas at Austin