Foolishly took lowball, I think, on one lease, need help not to do it again on remaining

New Mexico Mineral Rights Lea County, NM
1

We got a sale offer on mineral rights in Lea County several months ago and know enough not to sell, but said we might be interested in leasing. They started at $50 nma, 5 yr, 3/16. We looked at our last lease (several years back) and countered at $150, which after reading this forum, may have bordered on estupido.

To make matters worse, we ended up accepting a 25-year lease (yes 25 years) at $550, 1/8 royalty, which is about equal to $110/net acre on five consecutive 5-year leases. Kiss that goodbye.

These rights are not close to any producing wells. (T14, R37). That was part of our reasoning on accepting the terms. We had not leased this area of rights in our lifetime, and have had no other offers on it.

Also, very unfortunately, I had not found this forum to see what the current going rates are.

So, the same landman has now offered the same deal on over 100 more net acres in the same section, T14s, R37.

Unfortunately, my sister emailed him that we’d accept that. But this was only a few days ago, and we have not signed the official deal acceptance papers. ( Three siblings share the rights equally, so each of us has to agree).

I think my sister’s email acceptance won’t contractually bind us to the price, so am asking them to hold off signing.

I really need some input so we don’t make another costly mistake. What would a good offer be for rights that are not close to producing wells?

I’m thinking we should definitely not do the 25 years since I’ve seen no one on this forum accept this length of lease. And from what I’ve read, we should get at least 3/16 royalty if not 1/4. But what price should we counter at 5 years, or 3. What would you do?

2

I've never heard of that type of terms, but maybe others have. It does sound like a lowball offer. We have acreage in Section 11 t-16S, R-37E and if you want to private message me or private message me your phone number I can let you know the company we went with and the terms, which are much, much better. We just signed last month.

3

WOW, you really should not take that offer. there are a lot of wells in T34R37. We are south of you in t24R34 and are getting 5-10K per net mineral acre for a 5 year lease. at 1/5 royalty. hold out!!!!!!!

4

Thanks so much for the responses. I’m just wondering why we haven’t had any other offers on our rights. In fact, this company only wrote to my sister…the other two of us have not received any queries.

If this landman doesn’t work with us on an offer much closer to what is being suggested here, would we then need to approach other companies since they haven’t approached us?

5

The landman usually represents an O&G interested party. These days most work for speculators, who want to tie up as much acreage as possible. In this case, whomever has that lease gets to release it later for major $$ when a O&G wants to drill. Do not sign! If you are not comfortable, get a lawyer or hire your own landman to research the best deals going.

There are speculators who will be more than happy to lease your property, but you cannot rely on them to give you the best terms. They are not working in your best interest.

Also it's common to only contact one member of the family when seeking rights, saves trouble.

6

Yes, I would approach other companies if I were you. I can give you some suggestions if you would like. If they contacted your sister and not you and your other sibling then she needs to give them your address and phone number. They probably don’t have your correct contact information. Make sure your sister doesn’t accept any more offers until the three of you are in agreement. It’s good that you are doing some research before going any further.

7

As presented, this is a situation where a so-called landman took extreme advantage of unsophisticated mineral owners and now wants the rest of your assets. He can then sell your lease and retain the difference between market royalty and the 1/8 you got. You should absolutely have no further dealings with this person. Furthermore you sister should email that no one is agreeting to his offer terms or to the lease form. If he threatens any legal action, tell him to call your lawyer.

8

Thanks so much, Paula. I sent a friend request, which is required beforre I can private message you for more info on your lease. I’m so grateful that people are willing to help with all the information. On the first deal, we were working in the dark by ourselves, so were using our old leases as a cost basis and had no concept of what is going on now. (None of us live in the area now).

9

My sister and I did discuss this beforehand, so I feel like the leading blind one for not researching mineral rights owners beforehand. I admit I was sucked in by this unexpected “free money” for rights we’d never leased before. And I’m the most conservative financially, so was even questioning whether our counter of 150/acre was too high. Yes, Ive given myself a good kicking, but at least we didn’t undersell the whole boatload, thanks to my sis holding some back.