Hi, My mom recently added my name to her mineral rights in Eddy County New Mexico. She has had a contract with Conoco Phillips for maybe the last 15 years with little to no activity. She got an offer from Core Resources LLC to try to get the lease from them and give her $2000 an acre afterwards. This doesn’t sound right to me because shouldn’t it be 4 or 5 and acre. And, who is this company? And, I can’t even begin to understand the details of the contract they sent her. Would it be better to stick with the old lease that I can’t read because I don’t have it. I would think one would want a lawyer to negotiate and put it on the fair market to get a new lease? Aren’t there like a million things to pay attention to when signing a lease? She has other leases for other bits of land this is for 7 1/2 acres in Section 14-22S-26E. It seems foolish to stay with the old lease but even more foolish to sign a new one without doing due diligence. I’d almost rather sign nothing now, then sign something bad.
I’m not sure what contract means in this statement: “She has had a contract with Conoco Phillips for maybe the last 15 years with little to no activity”.
As far as I can tell all of Sec 14 is held by production, and has been since 2007 or so. My guess is that “contract with COP” means they have your lease.
Your questions are a bit confusing.
- “Had a contract with Conoco Phillips for maybe the last 15 years with little to no activity” I highly doubt she signed a 15 year lease, so Is her Conoco lease producing?
- “Core Resourcres is trying to get the lease from Conoco”, what exactly do you mean?
- “This doesn’t sound right to me because shouldn’t it be 4 or 5 and acre” Its only worth what companies are paying for at the present time in that location. Location and timing means everything! If someone you know got a much higher offer, but they are a couple miles away, it may not sound like much, but a couple miles can be a huge difference in pricing and well results.
- " It seems foolish to stay with the old lease but even more foolish to sign a new one" If the old lease is no longer producing or if you had a depth clause in the old lease and new deeper formations are now being targeted, then there is no such thing as “the old lease” and you can sign an OGL with whatever company offers you the best deal going forward.
You are wise to slow down and find out more. Conoco has several old gas wells in the Morrow. Your mom should be getting royalites on them. They are very close to end of life and horizontal drilling into new zones is rapidly moving your way. I suspect lease prices to rise.
Core Resources may be trying to get what is called a “top lease” from her. It is a lease that they want to have in place when her lease expires when those wells die. (The pay her $2000 “afterwards” was the clue.) I do not do top leases. They can cause legal issues, may not be competitive in pricing when the leases die. Attaching a paper on them. If she has an old lease at 1/8th (12.5%), then she needs to know that new leases are at 25%! An Overview of Recurring and Related Issues Involving Top Leasing.pdf (210.2 KB)
The new leases in section 13 just to the east of her are at 25%.
Your gut feeling is pretty good to wait and see what is offered closer to the actual drilling of the new wells. Permian Resources already has permits in the Wolfcamp in section 12, plus sec 1 & 2 just to the north.
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