What sounds better… Dunn County Oil Lease… An annual lease or a 3 year lease? 20% upfront (top lease).
Amy:
Could you further explain what terms for lease you were presented. I am not sure that I follow exactly what you are saying in your post. Is the lease for one year or 3 years and what terms for each have you been offered?
One company offering 25% upfront for top lease and a 3 year lease. Another company offering 20% upfront for top lease and 1 year lease. Price per acre of both companies about the same.
If it were me, I would wait until the base lease expires.
Amy, I think you have the most leverage if the lease expires. If one of the companies is trying to top their own lease, I’d ask if they’d like to negotiate a new lease now, instead of a toplease and use a new lease to correct anything I felt was deficient in your current lease, royalty % and charges/deductions for conditioning gas for sale or charges for trucking oil. New lease, with the original lessor, would be safe from the standpoint of getting the terms you want whether they commence operations to drill a well in the period of the old lease or not. Unless you have specific language in your lease about having a rig capable drilling the well to total depth on site, your primary term can be extended by a road leading to the prospective pad site, as operations to drill a well. If those wishing to top your lease won’t meet your terms, you might as well let the lease expire, unless you are certain the original lessee is going to start operations in the primary term, in which case it would be nice to collect the toplease bonus money. I know I didn’t answer your question of what you should do, but I hope I gave you enough to figure out what is right for you. Good luck.
Amy:
I agree with the above posts in that you should let the base lease expire. This area is proven and active so negotiating a good lease should be no problem.