How do I evaluate a lease offer?

[Male]

I have lease offer is for Montana Richland County from Diamond Resources for 9 acres for $100 an acre.

What should i be looking at?

[Dusty1]

That’s a simple but very big question. Without knowing anything about Montana, I think as a starting point you’ll want to consider the royalty percentage they are offering, what term lease they want and whether there are options giving the lessee the right to extend it. Generally you want to go for the shortest term possible and not give options, which only benefit the other side. See what you can find out about Diamond Resources. It could make a difference if they’ve drilled wells and have a track record, or are just someone taking leases.

At the top of this page click Mineral Help and check out the articles under Oil & Gas Leasing.

With a small mineral interest you may not have much negotiating leverage but gathering all the information you can is the key. Try contacting some of your neighbors and see if they are considering lease offers and would be willing to share information and possibly working together in negotiating.

[Male]

The offer is 16 percent for a five year term. I believe I have a small mineral interest but I’m not sure.

[James_Garner1]

It looks like Diamond Resources is a contract/landman company. This means they are most likely purchasing for a client. Request the disclosure of the client prior to accepting any OGL offer. If you do not need the money today, then you can simply decline the offer and request a more significant offer. A good landman will ask you for your terms, but just politely say they need to do better if you are going to consider their offer. You can check out the drilling and production activity on the MT state website for free. Good luck to you.