Hello Mineral owners:
I am new to this world, on December 21st, I received a letter from an attorney who represents an oil and gas company interested in leasing our 74.75 acres for vertical drilling of oil and gas.
The letter states that my net mineral intrest is 3.125% and 21% royalty interest from the production of the well.
My question is how do I determine the total value of my asset based upon the above information.
Kyle, from the small amount if info in your post, it appears that you only own 3.125% of the minerals in the 74+ acres in question. The 21% royalty would be what the company is willing to give you for royalty on any production that takes place associated with this lease and any unit this lease may be part of. You mention vertical well- has one been drilled already? Or are they talking future wells? And what about horizontal wells? These are common in parts of Fayette Co- but if the 74+ acres us part of a horizontal well unit, it will only be a fraction of a several hundred acre unit. You also have not mentioned any bonus numbers or lease term/ time frame. There is now way to to know how good any well can be but one can get an idea of potential based on historical and trend activity. A lot depends on where your acreage is located. What are the full details if what you are being offered? Do you know which company wants to lease your minerals?
Kyle:
As your opening statement just stated, you are in a "New World" and you are starting this battle with a short stick in your hand and trying to deal with people that are carrying a multitude of ballistic missiles. Rock Man just said you didn't give enough information is just one indication that if you plan to enter this game, you definitely need help. First off there are many people on this blog that are capable of giving you much of the information that will help you become informed which is just a beginning. IMO, we are not in a good time to be leasing; but, anytime is better than no time at all. I would recommend that you pick up your bags and go see one of our local Fayette County Attorneys. By now most of these guys have dealt with this long enough and done enough leases to be able to at least keep you away from most of the major pitfalls of leasing. My experience is that our local guys are very reasonable and are familiar with our area, the oil structures as well as most people doing the leasing.
Before even going to an attorney these are a few things to be aware of:
1. Surface Acres owned: If you own the surface acres, you should really be concerned as to how this all plays out and you should be very much concerned as to the surface acre protection as well as potential expenses that you might get stuck with.
2. Mineral Acres Owned: Do you own your minerals outright or do you just have minerals that are part of this surface location without being in any specific location?
3. What is the bonus money per mineral acre? Right now I would guess that it will not be very much especially since you don't have many acres.
4. The 21% royalty isn't a bad royalty percentage; however, will it be cost free or will they charge you every time they take their secretary out to lunch?
5. Hang in there and keep learning; but, IMO, you need to get some expert help and a few dollars spent now is sure going to outweigh the problems you will potentially face later on down the road when and if they do drill a well.
6. Good Luck and welcome to the Fayette County MRF.
Thx so much! I will get started with the information you are giving me. I won't lie to you, its a little scary. I will proceed very carefully.
Thanks.
Kyle,
Bigfoot and Rock Man have given you very helpful information. If you would like to get a good rundown on things to do and things not to do now, google "Mineral Wise" (formerly "Mineral Web".) That site is operated by the same man who operates this Mineral Rights Forum, Ken du Bose. It's also free. When you get there, look up to the site's top line and click "Owner's Guide" then click Lease Proposals. You will find a thorough treatment of what a person who gets a lease offer should do and not do.
My statement was only partly accurate. Google Mineral Web, then at top click Forum, then Owner's Guide. Then click "Lease my Land". The things to do and not do are found by links at the bottom. (You can also start by going to MineralWeb.com)
Thanks, I will do that.
Kyle:
Not to totally over load you which can happen very quickly; but, when you get a few minutes just open this link up and read and study until your heart is content or maybe confused. The TLMA (Texas Land and Mineral Owners Association) is an excellent organization that tries to help us keep our heads above the water. There is a wealth of information here.