Hi again,
I am trying to figure out how to discern which offer to go with/how to figure out what’s the going rate for area/land around me. I currently have two offers, and the newest offer currently doubled the last one with the bonus being 800/acre and 3/16ths royalties. Went back to the original guy and he upped his offer to 500 an acre and 20% royalties. I know our rights are in whats considered a second tier area for oil drilling but how do i go about finding out if these people are even in the ballpark of other offers in my area? I don’t know anyone in the area as I am out of state. Any help in this department?
Also am i understanding it correctly that if and when a well is drilled it locks in whatever royalty rate you signed your lease at until the end of the life of the well with no renegotiating or anything later? and if so how much is 2% difference going to make in the grand scheme of things?
Many mineral owners would prefer the higher royalty because over time, the extra percentage adds up from years and years of production. Perhaps more wells will be drilled in the same reservoir under the same lease and that will add up. Bonus amounts are usually minimal compared to a successful well.
Also, it is very wise to invest in a good oil and gas attorney to review any draft lease. They are usually in the favor of the operator and not the mineral owner and need edits and additions to the clauses to get a more fair lease for those many years.
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I have a lawyer who will review the actual lease agreements and make any changes that will make it a fair or better lease for myself.
I’m just the one negotiating the bonus and royalty rate which isn’t even me really “negotiating” I just told one about the other and now I have two different offers. I just don’t have anything to point at and justify why I’m asking for a better lease/rate other than each others offers.
That is the difficult questions and why the members of the forum can sometimes help if they have offers nearby. You can compare a common royalty such as 20% and ask what is the best offer that you will be giving in this township. If the other company is higher, then mention that. The clauses are the real money maker/saver. If you can get a no post production charges lease and various other important concessions, then the lease with the best clauses wins. Your attorney may also know what the going rate is in the area.
Not sure about your area, but 25% royalty has been standard in our leases for years. Make sure you have an oil and gas attorney look over the lease. Also the Texas Land and Mineral Owners association has a good lease to use. Membership required, but well worth it.
25% good luck, ha. you might have better luck drilling it yourself.