My dad grew up on a small farm near Bethel and my mom still owns the mineral rights there. She was contacted last week by a landman offering her a 5 year lease with a 2 year option for $150 an acre and a 1/6 royalty interest. The lease is with BROGO Minerals.
Is this offer lower than the 20-25% I have seen mentioned in recent posts because EB Reynolds is not in as good of an area, or is someone just looking to re-lease?
We could use some advice on that specific area and/or BROGO.
Never heard a BROGO - most likely a broker either working for another group or looking to lease and flip to a yet to be determined buyer
Five plus two is a little extreme on the lease terms - 3 & 2 or a straight up 5 year lease is better instead of tying your lease up for up to 7 years
1/6 is low / and 20-25% was the norm for a while but things have gone done a bit lately. But a 3/16th's is something to go for (if not the 20%)
Bonus is a bit low - try to get $250 per net acre
Your bargaining chip power will depend a lot on the size of your lease - the smaller it is, the less power you have/
Only activity in the area is OBENCO and their horizontal Rodessa drilling effort - they have been doing this along the Henderson / Anderson Co line and are move both east and west from their core drilling area.
Good bet BROGO may be working for them
Angie,
After checking the GIS Map I see where your Mom's minerals are due north of Athens, Texas. To the west and south of her minerals are some older oil, oil/gas, and gas wells still producing. Also several plugged gas wells. The latest activity was to the south in A-332 where a gas well (API 213-30942) was drilled and completed in Jan. 2008 into the Cotton Valley Sand Formation....Link to latest Production Data on well 30942:
Also to the west of her minerals in A-327 is a oil/gas well (API 213-30276) drilled in 1980. Also in A-724 an oil well (API 213-30940)(Rodessa Formation) drilled completed in Nov. 2007. An oil well is still producing in A-165 that was drilled into the Rodessa Formation. As far as I can tell all these older wells are still producing.
There is definitely production in the area. I agree with Rockman on his assessment of the bonus and royalty amounts. This is in a different area from what O'Benco has been drilling in but they may be wanting to expand their footprint in Henderson County. So far all these wells that have been drilled just north of Athens have been vertical wells and O'Benco may be wanting to try some horizontal wells into this area. You may have to negotiate/be flexible to complete this lease.
GIS Map of Henderson Co. A-687 and surrounding area:
Clint Liles
I know everyone says it, but you two are very kind to help out those of us with ties to East Texas but no local knowledge.
Below is what I found on BROGO in case any of these connections mean anything to you. It looks like it is at least partly locally owned. Goodwin is listed as "Athens" and Brown, Goodwin & Company are listed as Kaufman.
The lease is only 25 acres - it was just a small family lot, so there is likely no bargaining power. I would imagine they could just go around the lot if they needed to, is that right? Is there a downside to the industry to lease to brokers?
928-image001.png (14.7 KB)I manage minerals for several entities. We have just been approached by a landman representing this company. Initial offer was 1/6th RI. We requested 3/16th RI and they agreed. We never take a 1/6th. We will not give anything but a 3 year lease with no option. For Henderson County the high end of bonus per acre is $200/ac. I think you can counter-offer - ask for 3/16th RI, $250/per acre bonus, 3 year lease with no option. Ask for a vertical and horizontal pugh clause too - always. I checked the current leasing in Henderson and there are a couple of companies leasing there for 1/6th and 20%. All are three year leases and some have two year extension but no more. Hope this helps.
Cindy, Curious if you have anything about post production cost in the lease. We are dealing with them now and want to be sure all is fair. Also is their need for separate leases on oil and Gas same location ? Due to the production cost of gas versus oil ? Thank You for any advice.
