Is it better to lease a property or wait until the area is pooled

Oklahoma Mineral Rights Carter County, OK
1

Hi,

I am looking for some guidance. I received a low lease offer for Carter County about a year ago. There was discussion previously on another county that was talking about waiting for pooling instead of leasing, which is what I did.

Is there guidance or suggestions on leasing or waiting until pooling? Obviously leasing you know what you are getting up front monetarily and you can negotiate the lease. If pooled, do you get to negotiate terms or only the options they provide you?

Your help is appreciated.

Thanks,

Bryan

2

Bryan if you want to accept my friend request I will give you my # and go over how the pooling works.

3

If you wait for the pooling you basically lose all chances to bargain. You won't get a depth clause, a gross proceeds clause, a shut-in clause etc. You will get an average of what the surrounding sections got when they leased. That being said if the average is more than you were offered, you win. If the average is less than what you were offered, you lose. The corporation commission regulated pooling, if you want the govt. dictating your mineral rights then waiting for pooling might be for you. Otherwise do a little research and get the best offer you can and get the clauses you want. Otherwise take what you get

4

To correct a bit, you do get a modified "depth clause" because the only zones they can hold are the zones in the pooling order-everything above and below is still open to lease.

Since 2012, my understanding is that pooling does give you gross proceeds.

1 Like
5

Under the pooling they only have 6 months or a year to drill. After that they have to refile and pay you another bonus if they want to drill.

6

In Oklahoma forced poolings, you do not receive an average bonus, you are supposed to receive the highest per acre bonus paid within the last year in the 9 section square of which you section is the center. However, the information on the bonus is usually provided by a landman employed by the pooling company and may be a little subjective. Usually, it is pretty close to the best bonus.

7

Can you please help me to understand what are gross proceeds? Do gross proceeds include the hedge values E&P receive? My problem if gross proceeds do not include hedge values, is that an owner's minerals can be sold for $1 or even 70 cents, while the E&P actually receives, say $3 or $3.25, because of its hedging contracts. The E&Ps are still motivated to seel the owner's minerals because they have eliminated the risk with their hedges. BUT, the owners are not protected. I strongly feel that owners need to be protected with some type of 'minimum value' for which their minerals can be sold. Something like the terms of the greater of the value of 'the average close of the Henry Hub index fo the month', 'the highest hedge value used by the E&P for the month', or $3. This way, owners can be assured their minerals are not being sold for nothing, when they really should be shut-in or use the hedge value. This almost always happens, that I am aware, and E&P always have hedge contracts which will be higher than what seems to be quoted as 'market value'. Again, does gross proceeds included hedging? If not, to me, this is an enormouse issue.

8

Thanks, Bonnie. This is great info.

9

Thanks, Ron. That is good information