Try to avoid leasing without a dry hole bonus in the lease. You can easily regret leasing to a hard luck poor boy operator. One dry hole for whatever reason destroys mineral value. At least with dry hole payment you can offset lost royalties.
Never heard of this. What does it look like? How do you structure? Like another lease bonus payment?
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This is to be included in basic lease agreement. Fracing pay is a separate operation on a separate form.
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move in pay $3000
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Spud pay $3000
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Drilling under basic lease agreement
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Completion pay (run casing)
$3000
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if not completed $25000 for loss of projected royalty (dry,hole problems, etc) and destroyed value of mineral property
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If completed and fracing is recommended with high hopes and against the odds
$25000. Don’t let them destroy your mineral value forever then scram out.
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Further life lessons available
$25.000 Frac fee. To surface owner. Before Frac. In case it doesn’t produce and the value of your minerals is gone:white_check_mark:
It’s separate from basic lease agreement Completion memorandum. Get operator rep to sign and print and date when leasing. Can be notarized but not required. Take pictures of signed document keep original
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Rockhound, agree that lose some marketability and value with a dry hole when dealing with marginal companies, and I like the concept of the upfront payments. Couple of questions. 1) do you have a draft of the letter presented to company that you can share? 2) how do you suggest the previous payments be handled if well is commercial? Refund monies or let lessee take from proceeds of the well that are due the mineral owner? 3) assume you only use when well will be first in a unit. What about when have wells producing and new drilling company moves in that may not put out the effort needed and end up with a dry hole? Thanks for your comments.
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