Is there any wisdom on how to compare state land lease auction value to private land mineral leases? For ND?
Last state auctions in our county in ND showed avg $2000/acre/5yr while the landman wants to renew (August 2011) with $500/3yr. He claims state auctions are easier for the title???!!!
Any comments?
What he says about title is true. The oil co also knows it’s in a competition situation, the state may be accepting 1/6 royalty when mineral owners will try to get more. Are you dealing with just one oil co / lease agent? I like to get competetive offers. The oil co’s don’t own alot of minerals, they have to lease yours to make money. If you lease to someone else and they participate in the well the operator won’t make anything off your acres. The landmans job is to lease acres, cheap if he can, but if he has to pay more, they still need acres. If the landman knows he’s in competition he will trot out a better offer. If they won’t pay what I think it’s worth, I’d be happy that they went away and quit wasting my time. Next years lease rates may be unheard of this year. Years ago 500 acre and 20% was unheard of. I think competition is the difference. I’d get competitive offers.
Andy,
Most importantly, compare the terms of the state lease with the terms you were offered as well as the geologic potential comparison of your minerals and the closest state minerals as well as the lease acreage. It costs a leasing company almost as much to lease 40 acres as it does 640 acres from an individual. An exploration company can put a lot more into a state lease bid if it doesn't have to pay a leasing company and get good title and usually more acreage.
Gary Hutchinson
Thank you Gary. Given properties that are close (within the same township or 8 or 9 sections away) should the discount on a private lease be 15/30/50% or more? Our particular rights have been leased by the same outfit for over 12 years, so they should be comfortable with the title issues.
Andy,
There is no discount for private minerals! Exploration companies will pay up to an economic limit they set internally depending on there confidence in their project. it is up to you to get them there without listening to the lease brokers. Also read these pages and understand how a real exploration company will pay you for your lease.
If you want to make a fair deal after 12 years of waiting and worrying, Contact me by PM with some land particulars and I'll try to set you off in the right direction for you not the lease broker's sales pitch or a supposed exploration company's promises.
Thank you Gary. Given properties that are close (within the same township or 8 or 9 sections away) should the discount on a private lease be 15/30/50% or more? Our particular rights have been leased by the same outfit for over 12 years, so they should be comfortable with the title issues.