Have 80 nma with lease offer at $500 & 1/4 royalty and 3 year term and my current lease at $600 & 1/4 is not up till October. The same company ( Turner Oil and Gas) is making the offer. I would like to know if there are other lease offers in my area and if rates have changed in 3 years. This was there first offer so I am sure I can get 600. Thanks
Paul,
Extreme changes in geologic potential have taken place in Lea county in 3 years. The oil production potential has actually created an entirely new economic atmosphere. You would do your mineral ownership a great favor and obtain some USGS research then get confirmation. Leasing agents have little incentive to educate owners on the fair market value of the amount of technically proven oil the owners now control. Owners who don't know the fair market value to industry of their minerals will be lining the pockets of leasing agents and later producers with the old style leases being offered.
I do this everyday so I'm sure you can get $600, with a little effort you may be able to get $750 but in October or November, Legitimate Operators may be willing to pay over $2000 and it will be worth it to them to reserve your minerals when it has been proven that they can get the oil that is there to the surface. The operators are also more willing to take leases that reflect the new oil business as well.
You are in an owner's market. Understand your current value before asking for a little more bonus. You may never get another lease opportunity. Wells being drilled today horizontally, as most in Lea are, will hold acreage for many decades and the chance of a horizontal well being competed as a producer is very near 100% not 12% as in the old business.
Gary L Hutchinson
Thanks Gary, great news and we will wait a while and get some more detailed info since we have until October. Do you have a source for a better lease instead of their Producers 88 they want you to sign and what are your thoughts on a Pugh clause? Thanks again
They have now offered 700 & 1/4. I’ll get a local oil & gas attorney to review the lease and ask about a Pugh Clause and other details. We might go with this offer.