We received a lease offer and looking here to see if it is fair as it is a small acreage and likely would not get legal representation worth the cost.
the offer is $4K NMA, 5 year term. 17% royalty. with 5 year option to renew.
thanks in advance for thoughts on current fair pricing.
I do not know the market in OH, but I would never do a five year option to renew. I prefer no more than three years, but some states may have more common five year primary terms. It would be wise to get a good oil and gas attorney to review any lease as the drafts are in the operator’s favor and need some negotiation to get better clauses and perhaps a higher royalty. 17% sounds like the low end.
thank you! for the info. I doubt with less than 5 NMA that it is worth to get an attorney / that one would even take a look. appreciate the insights @m_barnes.
M_Barnes is right about the 5 year renewal option, insist on primary term of 3 years with 2 more years option. Here in Dimmit County, Texas, I received $2.5K per NMA and that was the bonus for signing a lease with them. The percentage of production (oil, gas and other liquid hydrocarbons) for me was 24% but back in 2011 (boom years) I received 25% royalty. But one never knows what a BBL is selling for in any given day so it could be high or fairly low. So yes 17% is a very low end. I know all this because I have worked with an oil and gas lawyer for any lease signed. And again M_Barnes is right about the document drawn up by the people looking to lease will be totally in their favor. If your NMA is less than an acre and the bonus would be the $4k, I guess it’s worth your while not to hire a lawyer but still the royalty percentage of 17% is low even for less than an acre. Good luck to you, Sir.
I do not ever accept an option. It puts the operator/lessee in the driver’s seat and not me.
You might want to check out the Ohio Chapter of NARO (National Association of Royalty Owners.) They are a helpful group. Have conventions, townhalls, Zoom meetings and keep up to date on the activity in Ohio.
Thanks for your insight. I now have multiple offers - once all is done I will post an update.
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