What is best choice for royalty?

I have mineral right property in Pittsburg county that I have been given an option lease/ assign interest for a 3 year term at $500 an acre bonus and 3/16 royalty or the same except $300 an acre with 1/5 royalty, or paying our share of drilling costs and participating in the well. We have 40 acres mineral rights. What would be the best choice

Personally, I would not sign anything at this point. In general, I go for the higher royalty and never participate. Get a draft copy of the lease and then ask tons of questions on the forum because that lease is probably going to need a lot of negotiation before signing. It will be in favor of the company at this point and many clauses will need to be changed before signing. Find out who they are leasing for, when do they plan to drill, what horizon, vertical or horizontal, when is pooling, etc.

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A lease with a great bonus and royalty might be a horrible lease depending upon the other terms. Also lease/assignment language must be carefully examined.

Isn’t Pittsburg county all natural gas wells?

Pretty much, yes; Dry gas, too.

Z28- It is my opinion that the best deal of the two is to take the $500/acre & 3/16ths. With Pittsburg County being predominately gas, prices are so bad now, and don’t look good for another 10 years, the offset in the additional 1.25% royalty will take many years to make the $8,000 difference. Get good lease provisions and take their money.

Todd M. Baker

You really have given great advice. Unfortunately, I’ve come up against companies refusing to honor my modifications. I was only following what was advised by those with NARO. Maybe I need to be more steadfast? I’m just so afraid they will revoke any offer and then I’ll be out of potential royalties. Thanks!

In gas areas, it can be a bit more difficult to get modifications. If they truly intend to drill, you can either lease or get force pooled. Either way you get royalties. I am usually fine with a force pool with a company that won’t take reasonable modifications. (Of course, my idea of “reasonable” is probably different from the operator’s idea of “reasonable.” We both need each other, so a good middle ground helps all parties out.

If they don’t intend to drill and are merely speculating, I will not sign a bad lease just to get a little bit of bonus money.

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That’s great advice, too. Thanks for your reply.

Ms. Barnes I wanted to ask to you briefest of question but it will not let me send a private message. I may not know the trick, but I thank you for all the great advice you give.

If you have a question that will benefit the whole community, feel free to ask it in general terms here.

I have been reading your posts and I am amazed at your knowledge. We are young family and recently obtained a interest in a good portion of mineral acreage in what I think is called the Arkoma Basin.

Currently the income about $1,500 ish between newfield and xto wells. Ten years ago it was a lot more just doing some research.

The areas is Sections 16-17, 20-27, T5N, Range 12 East, Pittsburg County.

This area has been highly developed and I just wanted to get your thoughts on whether you think in general an area like this is close to being depleted or if maybe it will continue to be a place of occasional new wells and development.

It’s fine if you don’t have time to answer this and just know you have some great insight! Happy Holidays!

Welcome to the oil and gas business. That township in Pittsburg has been heavily drilled. Sec 17 may have room for a couple more wells. 16 may have more room. It just depends upon how much reservoir depletion has already occurred. Same with 20. You have a mix of vertical wells and horizontal wells. 27 probably has the most potential for additional wells. Gas prices are pretty low right now, so not a lot of new drilling, but if the price goes up, the maybe. Merit had new permits in section 28 and 33 in 2019, so there is some activity near you.

Gas wells can have a nice long life. Of course, they will decrease over time. Parts of the Arkoma basin have stacked pays, so some operators are beginning to take advantage of the deeper shale plays. Time will tell.