I received an offer for $1500 lease bonus and 1/5 royalty in Beckham Co 21-11N-23W. It seems a little low to me but I’m looking to get some information from the pros in this group! Any help would be greatly appreciated!
Well, my acres are about 10 miles away and I haven’t had any activity in my mail box. I would consider your offer to be very acceptable for me but my leasing experience for these acres are very dated.
I hope you will post if you have any additional information. I assume your offer is from King.
My offer is from JMA. I hope that helps.
That offer is reasonable for this time frame. Nearby poolings have been for much less.
If you have not leased recently, it would be advisable to get a good oil and gas attorney to review any draft lease. They are usually all in the operator’s favor and need significant edits to protect the mineral owner, especially against post production charges which can diminish royalties significantly. If hiring an attorney is not feasible, then waiting for the pooling and selecting the highest royalty is an alternative.
Most likely the upcoming well(s) will be horizontal, so getting the highest royalty is optimal for the future payouts.
The $1,500/acre offer is strong, as long as the royalty is a minimum of 3/16. I agree with Martha that you should review the fine print to ensure the terms aren’t too one-sided in favor of the oil company. Beckham County has been quiet for a long time, so I’d be happy with an offer at this price point, provided the rest of the contract is fair.
Thank you so much M Barnes! I am actually an attorney but I don’t do O&G so I do have access to attorneys that do. Even in my cursory viewing of the lease, I see problems with it, as you mentioned, it will need significant edits. It contains post production charges 100%
These terms concern me. less a proportionate part of the production, severance and other excise taxes and the cost incurred by lessee in delivering, processing, compressing, transporting, or otherwise making such gas or other substances merchantable, said payments to be made monthly. If gas from any well or wells on the premises capable of producing gas in commercial quantities is not sold or used off the premises or in the manufacture of gas for a period of one (1) year or more, during which time there is no other production from the leased premises, then lessee shall pay or tender as royalty for such annual period a sum of one dollar ($1.00) per net acre within ninety (90) days after the end of such annual period. If, at the expiration of the primary term, lessee is conducting operations for drilling, completing or reworking a well, this lease nevertheless shall continue as long as such operations are prosecuted or additional operations are commenced and prosecuted (whether on the same or successive wells) with no cessation of more than 90 days, and if production is discovered, this lease shall continue as long thereafter as oil or gas, are produced. In addition, if at any time or times after the primary term, there is a total cessation of all production, for any cause (subject to the force majeure provisions), this lease shall not terminate if lessee commences or resumes any drilling or reworking operations, or production, within ninety (90) days after such cessation. Drilling operations or mining operations shall be deemed to be commenced when the first material is placed on the leased premises or when the first work, other than surveying or staking the location, is started thereon which is necessary for such operations.
That is exactly the paragraph to be concerned about (among others). The post production charges, the shut-in time frame and price per acre, the continuing operations clause and the commencement of drilling clause can all be handled by strategic edits by a good attorney. You also want to be careful about any option to extend clause, force majeure, warranty clause and a few others.
Thank you so much M_Barnes! I have contacted a local O & G attorney to review and amend the lease. I’ll keep you posted!
I got this back from the attorney. I still think the paragraph I sent you M_Barnes is troublesome, what are your thoughts? RE: Oil and Gas Lease Forwarded to Gae Widdows Ms.Dawn, I have taken a look at the oil and gas lease you emailed me. The first highlighted provision allows for the payment of severance tax to the state and Federal Governments. Also, it provides for holding the lease by production beyond the primary term (three years). This may only occur if the well is capable of production and/ or operations are continuous on the premises. This is a standard provision in all oil and gas leases (AAPL1982 Form Leases).
The second highlighted provision means the lease is paid up for the primary term (three years) for the upfront lease bonus paid to you.
My only question about your lease is, are you getting current fair market value or the equivalent of the highest paid in your area? With your permission I can have a friend of mine investigate that. It involves contacting the Corporation Commission and getting info from them.
[quote=“Dawn_Williams, post:7, topic:87381”] and the cost incurred by lessee in delivering, processing, compressing, transporting, or otherwise making such gas or other substances and the cost incurred by lessee in delivering, processing, compressing, transporting, or otherwise making such gas or other substances merchantable,
The clause about paying post production charges is the one of concern. You want that part to be struck in my non-legal opinion. The rest of the paragraph is fine.
You are getting offered what the agent is being told to offer you, not necessarily the current fair market value or the highest paid in the area. That information is competitive and secretive. The OCC will not be able to comment on the market value.