Hey guys, I’m totally new to this kind of stuff. My wife and I inherited some mineral rights in Johnson County. Its 1.3333 acres at Township 48 North, Range 50 West. We were offered from Seven Sisters Oil and Gas a 5 year lease with an option to extend 3 more years for 400.00 dollars initial and then 16% net proceeds. Any idea what the going rate is and what should I counter with if its not a great deal?
Thanks everyone!
It’s Section 24 and 25.
My lowest offer is 18% 500 PMA
I would very much caution against granting an option to extend clause in your lease. This allows the company to extend your lease for an additional 3 more years if they don’t drill within the first 5 years for the exact same amount of money per acre that they paid you upon signing the lease in the first place. You don’t want to lock yourself into a per acre rate you negotiated 5 years earlier, the going rate could be much higher and you will want the opportunity to negotiate a new lease.
Plus if I lease to a company and they can’t get something done in the first 5 year primary term I probably want to be looking for a more active lessee next time I sign a lease.
This is also helpful to read Oil and Gas Leasing – Top 10 Things To Do — MineralWise
I have a couple of questions:
We negotiated on the royalty rate.The landman wasn’t budging on anything else unfortunately.
So we ended up accepting a royalty rate of 18.5%, $400.00 upfront payment to lease the land for 5 years and 3 year optional extension. Honestly, we didn’t have much leverage because the area doesn’t have many wells yet. We’ll see what happens.
The location of the land is on the eastern border of Johnson County in the center. Looks like energy companies are leasing land on the eastern edge of Johnson County and working their way in.