Hello All, My family inherited 80 acres in Divide county, Township 163 North, 96 West of the 5th PM. In 2013 we were offered a lease at 600 bonus per acre for 4 years. Recently we were sent a new lease at 60 bonus per acre for 5 years. Obviously we are not happy with these terms. I'm hoping to get feedback about what others are being offered. I don't see any comments later than 2015. Does anyone have any current information they can share? We understand that with the drop in oil prices the bonus would be less than in 2013 but this offer seems extremely low. Plus the 5 year term is not attractive.
My 2013 offers were about $500 3/16ths. I wouldn't go for more than three years. Getting a good lease with proper clauses would be the most important thing over the bonus amount. $60 too low now I would think. Probably a speculator if not one of the "big boys".
Far more important than the bonus is the lessee. If your acreage is in Section 21 and your lease offer is really for an extension of an existing lease, be very careful to whom you lease. As M Barnes put it, you may be dealing with a speculator who knows they can flip your lease to the biggest of the big boys.
The second most important item in the lease will be the measurement and payment of royalty. If you get too high a royalty, the deductions will be higher. Barnes reference to "proper clauses" should be taken very very seriously.
Production payments are hundreds of times more valuable than bonus payments. If you get the right lessee, the next lease may be the last for your lifetime. make it count.
Thanks for the response. Our lessee is Continental Resources. Looking at their website they look like one of the "big boys". Our current lease is also with them. The royalty on the current lease is 18.75% paid quarterly. The new lease is for 16.67%. So in all respects the lessee is offering less over a longer time. So I think our family should try to negotiate something more favorable. Diamond Resources is our land services contact. Any advice on how we should proceed?
Thanks for the response. Our lessee is Continental Resources. Looking at their website they look like one of the "big boys". Our current lease is also with them. The royalty on the current lease is 18.75% paid quarterly. The new lease is for 16.67%. So in all respects the lessee is offering less over a longer time. So I think our family should try to negotiate something more favorable. Diamond Resources is our land services contact. Any advice on how we should proceed?
They are trying to move you from a 3/16ths lease to a 1/6th lease which is the statutory lower limit in ND. They are one of the big boys and they will need some negotiation. They are trying to lowball you for five years to protect their acreage. I understand, times have been tough recently and they are protecting their interests. You need to protect yours as well.
You might want Gary (if he has time) or myself to read over your current lease to see what you should change in the new one. Gary is quite experienced in ND affairs. I focus more on OK, but have dealings in ND as well.
There are certain clauses that you want in your new lease that probably weren't in the first one if you signed their boilerplate one.
In many ways it's a very personal decision and much depends on situation.
!. Do you really need that lease bonus @$60 an acre?
2. Do you really want to be leased for 16.67% until there is no more oil and gas to be had from your acres? 1/6th or 16.67% being only slightly above the 16% statutory minimum you would receive if you didn't lease at all until the well payed out and recovered the risk penalty.
I think it quite likely you would get a well if you lease that cheaply. Continental wouldn't be asking if they didn't see value in your acres. If your acres were not worth drilling at the rates that can be expected in the next 5 years, Continental would not be paying Diamond to obtain a lease from you.
The cost of drilling a well in ND has come down drastically. Continental could drill a $5 million well and hold 1280 acres by production and allow them to hold the whole spacing for the next 20 years for negligible cost or slight profit. I would be concerned Continental would do just that. I would be concerned that my minerals would be placed on the shelf for later development after the initial well to hold them by production. I have 4 wells in 4 different spacings drilled by Continental 8 years ago in their "One and done" fashion. No single one pays enough that I would notice it if it were gone. All of them together are not a great deal of money.
If you really need the money, something is better than nothing. I think there is a good chance you would get "A" well in the next 5 years. I wouldn't care to consider how long it would be before they drilled a second one. But your acres would look good on Continentals books of proven acreage.
In fact, with the fall of oil and gas prices, the acres that Continental has mortgaged have dropped in value. I think some cheap leases and some cheap wells would be a quick way to balance the books.
I am not in great need for that amount of money so I would politely decline the lease offer and tell them that if it's worth anything at all, it's worth more than that. Feel free to quote me. But it is your decision and if you did lease, I would go for terms over bonus 1/6th where you pay nothing but taxes can be much better than 3/16 where they nickel and dime you to death. Get a good O&G lawyer in that case to look over your lease.
Just got an offer from Diamond Resources, $75/acre, 1/6 royalty, 5 years. T163N R97W
Not sure just what who or what Diamond is. My guess is a one man operation, postage due on the mailing we received, and bad cut and paste in the contract.
Not exactly enthralled by the offer.
We have just been contacted by Diamond resources (on behalf of Continental) they are wanting to lease both of our sections in to north edge of Township 162 - the offer is $150 bonus and a 3 yr. lease with 17% royalty - how does this compare with any other current lease offers. Obviously this is way below our prior lease bonus and royalty - any comments or advice is appreciated!
Consider CRI the 400 pound gorilla in the room. Give them what they want. Three years is an encouraging sign the they may drill. Since CRI is the best at developing oil in ND, don't hesitate or compare with non-existent opportunities. Make the least truly risk free, and no extensions. Don't plan on leasing again. Jump for joy that it is CRI. Make sure CRI is on the lease.