When is it usually the best time to negotiate and sign a lease for maximum bonus and royalty? I believe I’m getting oil and gas lease offers in a more speculative or early phase of the process, and because of that the offers will be lower. From talking with land men, scouring the internet, and communicating with people through this forum; I’m beginning to think of waiting until a permit has been issued and the spacing unit is determined is the best strategy. Essentially waiting for the “demand” phase to occur. I’m also considering waiting for the pooling order to come out, because “in theory” that pooling order is based on the high end of the accepted lease contracts already in that area and spaced unit. Is that correct?
My early offers are all offering cash per acre and 1/4 royalty. I asked one exceptionally knowledgeable land man if the 1/4 would most likely be offered at pooling. With some proprietary software, he looked at the most recent well pooling orders nearby and confirmed with some confidence that yes, he believed a 1/4 would more than likely be in the pooling order. Of course I want the max. royalty but feeling like holding out for a possibly substantially higher NMA bonus is little to very low risk. Any thoughts on this would be great!
All these leasing agents want our leases to sell to the operators, or for negotiation in working interest ownership in the well. Is that a relatively accurate statement?
At what point should a mineral owner expect the most attention from the land men, and is that when the highest value leases are signed?
I’ve been told lease agencies want the leases so much, they may often pay higher than the pooling order because of the “in” it can get them with the operators. Is that true?
I know there isn’t a perfect answer to these questions but I’m hoping there is a best strategy for likeliness of success. Thanks
To answer one of your questions. Should you wait until the pooling order comes out to lease?
Several years ago, several family members hired a lawyer to negotiate on their behalf as to leasing in an eastern Oklahoma county.
The company offered $400,000. The lawyer asked for a million. It didn’t get a whole lot closer. Then there was radio silence on the company’s part. After a couple of months, one of the family members contacted the company and asked if the last offer was still on the table. The answer was no. The company had drilled two marginal wells and essentially condemned the project.
Waiting may reap you a better bonus. But one of more of the following could happen: a) poor results from wells drilled nearby; b) oil or gas prices take a dive; or c) investor money in the company dries up.
Waiting does not always mean the price goes up. It could go away.
A 1/4 royalty with the right kind of lease is going to be hard to beat. These companies can change their minds overnight, sometimes. About 14 year’s ago about the time the SHALE hype started in Texas several big companies leasing in a local area quit and moved their leasing program to the Haynesville Shale and Eagleford Shale. Chesapeake was one of these companies that did this and left lessors with unpaid drafts overnight! If you have a large mineral acre ownership you have more power. “A bird in the hand is worth two in the bush”! Playing that game of not leasing is something I’m not doing if they are going to accept my lease and a 1/4 royalty. But don’t be extorted! Good Luck.
All sound advice and factors I am definitely considering. Thank you!
It all started with one landman reaching out. I made a post on the forum about it, then another agent saw my post and put in a draft offer. Followed by me contacting people and getting a couple more. Reason I’m explaining this is because it seems exceptionally early. From all the advice I’ve gotten like, “NEVER take the first offer,” or “patience helps make better decisions,” to the advice mentioned from above. Making a comfortable decision is difficult. I’m feeling like this is the first offer, and then I’ve kind of turned it into a little more.
Hopefully more forum members will chime in on their advice, approach, and experiences.
Like Mr. Dowd said, there is no sound advice, its all a gamble. Many have taken the first ogl and lost out on a couple hundred per acre and many have waited and never signed a lease, theres no set rulebook on this as things change very quickly, especially in “speculative areas”.