SM Energy Leasing

SM Energy made a large multi-lease purchase of producing and non-producing leases back in December. My leased minerals (480 acres total) were part of the purchase and will expire in November if not drilled. Just received a call today from the SM landman wanting to extend the lease for another three years for $1,000 per acre. I know the existing lease was valued in their transaction at somewhere between $4,000-5,000 per acre. While a sure thing seems good, I am going to wait and see if they drill my lease before expiration unless they substantially raise their offer. Is anyone else with leases that were originally with SM or Double Eagle or QStar getting similar offers to extend their leases?


I have had similar experiences with my acreage in S. Howard Co. and unless you really need the money I would recommend that you hold out a little on this. These lease flippers and middle men are making a killing on these

properties while the original royalty owners are getting mostly all water and no hay. I would also suggest you have your lease terms reviewed by an experienced O&G Minerals attorney as their-in lies the next level of treachery that you won't see until production and development starts. If you also own the surface, as I do, that's another important issue to take care of. Some of these areas are fetching north of $30,000 per ac. for 75% interest from the ultimate users.

Yes, I was offered $1000/acre also. Mine expire in June. I'm thinking the same as you.

Question, SM wants to renew lease for $1000/acre, lease expires in July. They want to pay 10% now and rest in July? Why?? Is this o.k. or normal? Section 16 Block 31 T-2-N Howard County. Any information greatly appreciated.

SM Energy Corporation

I don't understand the 10% down. Does not seem worth it to extend on these terms.

Mr. Perryman, that sounds like a Top Lease. If SM holds the lease presently and wants to re- negotiate it entirely and do a modification, I would do that. I would tell them that I was not interested in 10% down.

There is more than one way to make money in O&G and oil companies have no problem with securing your acres cheap and shopping them around to anyone that might like to have the lease. If they decide they want them you will receive the rest of the payment. If they decide they don't want them? And if they can't shop them to someone else? You will not receive the 90% remainder. Many people NEVER receive the 10% down payment in the first place but their lease is recorded and they have to get a lawyer involved to force the company to remove the cloud from the mineral owners title. 0%- 10% of the bonus will pay for ??? hours of a good lawyers time? Executing a Top Lease is often just buying aggravation. This is why I believe it is best to just let leases expire and renegotiate from that point on.

If you really want to enter into a Top Lease? Take it to a good lawyer. It may well wipe out the 10% down payment but it could be much more expensive not to have legal advise.

Thanks RW, that's what I thought they want to securing it an pedal it on down the road or not. I think I will decline and see what happens. Thank you for your input.

I think SM is short of cash. I have producing acres in a great area and SM assigned them to Oasis. SM had done nothing in the last 7 years to further develop the drill spacing. SM also cheaped out on the original 2 section horizontal well at 5.4 Million dollars. I would have much rather had no well at all.

Funny story. My check from SM was 2 weeks late and I called SM to inquire if they had sent it? That same day the check arrived. It had been mailed Without Postage! I contacted SM to tell them I had received the check and the circumstances, no postage, stamped by the post office return to sender/no postage and the envelope looked like it had been dragged behind a truck. Debbie Dinner at SM told me "it's not our fault". Upon hearing this, I had to inquire whose fault it was? Ms. Dinner informed me that the mailing of the checks is farmed out to someone else. I told Ms. Dinner that SM was responsible, for their employees, the mail service's poor performance. SM is just another company that acts like a 6 year old. I feel well shut of SM Energy but I can't say I have encountered any oil companies that act better.