I recently received a new lease in Marshall County WV. This is different than the previous lease I have negotiated. The lessee in this one is the broker company, not the oil company.
This seems odd to me and wonder what problems I could have from this kind of lease. I did ask who it was and did get a name. It appears that it is a new company and after doing some research I find that the broker assigns the leases to them later.
Any advise on this situation would be appreciated.
You have to look out for all the usual things, bonus, royalty, post-production costs, indemnification, warranty of title, shut-in payments, Pugh clause, formation limits, the works. What you negotiate for is somewhat dependent on how large an interest you own. If you have all the mineral rights plus the surface on a large tract you're a lot more likely to get significant changes than if you own 0.2 net mineral acres in a 32 acre tract.
Where you know the broker will be flipping the lease to another company you can expect not to get quite as much in the way of bonus and royalty amounts as the broker may be making money on the difference between what it pays you and what the company pays it. I'd be pushing for at least $4K/acre and 18% gross proceeds in Marshall County. You might be able to get quite a bit more for the bonus, and maybe more for the royalty depending on how large your interest is.
Also in this specific situation you may not be able to get the broker to be as flexible on some of the terms. It depends on how much communication there is between the broker and the company. The company may have given the broker very clear lines which the broker is not allowed to cross, or the company may be working very closely with the broker to personalize the leases. It's hard to say until you get into negotiations a ways.
Thank you Kyle. Does it matter that the oil company's name is not on the lease? Are there issues that can come up from this type of lease?
The broker should disclose whom the E&P company is to you at some point in the transaction. We have negotiated hundred of leases for land/mineral owners and always disclosed who the oil/gas (E&P) company was.