They are offering me a $500 signing bonus and 12% royalties. Should I ask for more and what should I expect? Thank you
12% is ridiculous! I would start at 25% and try to get at least 18% minimum.
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I would also ask for $1000 signing bonus. Might as well shoot for the moon and see what they will do. 12% is legally the lowest percentage they can offer you, so they are definitely lowballing you.
You’re definitely not going to get 25% royalty for a small ownership interest. I’d be aiming at 16-18% with gross royalties. Also, maybe up that signing bonus.
I negotiated for a bit more and got it. It was great at first, but TAXES are killing me!!!
Actually state law is 12.5% as the legal lowest royalty. You want to ask for 25% and you might get 18% on the negotiation. You should also ask for a gross proceeds royalty clause with no post-production expenses taken out.
The other option is you can sell it before you lease it. The advantage there - and check with your tax adviser of course - is that when you sell minerals its generally going to be Long-Term Capital Gains tax but signing bonuses and royalties are going to be considered Ordinary Income - taxed at a much higher rate. Some people dont want to deal with it messing up with their benefits or being taxed at the higher rates
Thank you for all your help. Is anyone actually getting royalties from small properties? They said they are running a pipeline through it, how much money could it be?
Thank you Yes I’m also concerned about the taxes. What would be a reasonable price for the property?
What company are you referring to about running a pipeline?
Antero is all i know
I’ve decided to sell the property so I’ll see what happens and what they are willing to pay. The standard offer works out to $1650 according to the landman.
Hey Tad! I live near this area and work in the field. I’m rather interested in the offer you received as it is multiple times higher than anything I have seen in the area.
Typically landman buy their property “per net mineral acre”. At that price, and your portion, thats over 20,000 per net mineral acre which is off the charts for the area.
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You may want to read the purchase deed in a lot more detail. As @Nick-TBM mentioned, that price is a bit too high for any normal deal.
What you want to make sure is that the deed does not reference any other acreage. You don’t want any catch-alls in your deed referencing other lands otherwise they can really screw you if you don’t intend to sell them other properties.
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Thank you I haven’t received the contract from Antero yet. I’ll have to get it looked at.
I could be wrong, it’s either $1650 or $1100