Sign lease for rights to drill in Eagle Ford shale, Texas?

Oil and Gas Leasing Help
1

Background:

I own mineral rights to land in Maverick County, Texas, which has under it the Eagle Ford shale formation. I know absolutely nothing about oil leases, let alone the law in general. I’ve been approached by a Canadian oil exploration company to lease to it the right to drill in the above-mentioned area. The bonus is $150 per “net acre,” whatever that means. The royalty rate is 20%.

Questions:

(1) Should I sign?

(2) Can anyone recommend a good oil and gas attorney (I live in San Diego) to review the lease?

Thanks for any help.

2

Jason,

Don’t sign anything yet. Everything is negotiable. There is a lot of activity going on in that area. You might also look on some of the other posts on this site regarding the Eagle Ford. You’ll glean a lot of good info there. How many net acres do you own? That will play a big part in your negotiating leverage.

3

I co-own about 1,000 acres.

Joel King said:

Jason,

Don’t sign anything yet. Everything is negotiable. There is a lot of activity going on in that area. You might also look on some of the other posts on this site regarding the Eagle Ford. You’ll glean a lot of good info there. How many net acres do you own? That will play a big part in your negotiating leverage.

4

Jason,

I manage hundreds of acres of inherited mineral rights in your general area of the Eagle Ford play.

The proposal you got is a starting point for the area. More important to you are whether the lease terms meet your plans for your property.

5

I would definitely use an attorney at some point. Before that, it would be good to educate yourself on the leasing & negotiating process of this industry.

Jason Nelson said:

I co-own about 1,000 acres.

Joel King said:

Jason,

Don’t sign anything yet. Everything is negotiable. There is a lot of activity going on in that area. You might also look on some of the other posts on this site regarding the Eagle Ford. You’ll glean a lot of good info there. How many net acres do you own? That will play a big part in your negotiating leverage.

6

Look to:

eaglefordshaleblog.com

… you’ll find more than you’ll want to read! As to your offer, re: Maverick County … the $150/ac sounds pathetic in contrast to what is both known and rumored in neighboring counties, should be nearer or more than $1,000/acre. ? NET ACRE: if you own 1/5th of 150 acres, you own 30 net acres. There should be a stated primary term, say 3 years on the lease and the royalty might be negotiated toward 25%, of which you’d get your net acres/gross acres x royalty% for your owner net royalty. Also, check and get advice on the pooling provisions. I’m guessing that’s San Diego, California, not San Diego, Texas, right?