Hello,
I have been offered a lease for some property in Reeves (section 48, Block 56) by R&J Graham. They're offering $800/acre for a 3-year term, with option to extend for another 2 years at the same price. Royalty offer is 1/4 (25%).
Seems a reasonable offer, but I'm wondering what current rates are in the area, as I know Permian is still hot despite the drop in prices.
Thanks for any info you may have!
-Jake
In Block 56, I would not go less than $3500/ac, 1/4 RI, and 3 year.
Thanks, Duke, that's great info. I assume there must be a lot of potential there in Block 56 then?
Thanks,
Jake
Got a similar offer from R&J in another part of Reeves County. And these same terms were also offered by a different leasing agent on yet another tract. I would interpret the request for an extension option as leasing in anticipation of future pricing or flipping, rather than for a drilling program. No one has an interest in leasing at these rates. We will wait for prices to rise and drilling to ramp up.
We hired Wade Caldwell from San Antonio. He made us an extra $30,000 and wrote a great contract. Consider hiring a professional or you will pay the price.
Jake,
Do you have the survey your acreage in? There are more than one block 56.
Thanks, all. Jerry, do you have Wade's contact info?
And, Mark, the specifics of the land are section 48, block 56, T-7, A-3291. Here's the info from earthpoint.us:
| Abstract Number | 3893291 |
| Survey Name | T&P RR CO |
| Block Number | 56 T7S |
| Survey Number | 48 |
| Alternate Survey Name | JOHNSON, E G |
| Scrap File | |
| Abstract Label | A-3291 |
| Full Survey Name | Texas and Pacific Railroad Company |
| County | Reeves |
| County FIPS Code | 389 |
| Calculated Values | |
| Acres | 733 |
| Centroid | 31.1444435, -103.7858886 |
Jake,
My contacts say that 56 T7S Section 48 is a little far out and $800 is a fair offer under current conditions. I agree with Jerry in that having a lease that protects your interest is probably the most important thing in this area at this time and you may want to have someone take a look at it.
Thanks, Mark, that's great info. I will do that ASAP. Any big things to look at in a GLO lease? I'm fairly new to all this, so any help would be great.
Thank you.
That's great information, thank you, Mark, and I may call you later on. Thanks again!
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Jake Norton said:
Thanks, all. Jerry, do you have Wade's contact info?
And, Mark, the specifics of the land are section 48, block 56, T-7, A-3291. Here's the info from earthpoint.us:
Abstract Number 3893291 Survey Name T&P RR CO Block Number 56 T7S Survey Number 48 Alternate Survey Name JOHNSON, E G Scrap File Abstract Label A-3291 Full Survey Name Texas and Pacific Railroad Company County Reeves County FIPS Code 389 Calculated Values Acres 733 Centroid 31.1444435, -103.7858886
Thanks, Jerry!
You should call Drew Reid at GLO for guidance on the terms. 512-475-1534. This is Drew's area for mineral classified leases. GLO will allow you to add provisions to the lease form. Think about specifying that well site, pipeline, roads and other damages and that any water used by the lessee will be paid at rates in UT Rate and Damage Schedule (this will be divided 50-50 with State); that you, as owner of the soil, will also have the rights as GLO under Paragraphs 9 and 10 (this entitles you to information about sales, production volumes and operations); and that under Paragraph 12, commencement of drilling means that a rig capable of drilling to final depth has spudded the well by the end of the primary term. This last requirement is because otherwise under a GLO lease, the operator only has to be pushing around the dirt on a well site, possibly with multiple 60 day interruptions, to count as commencing operations.
Great information, and hugely helpful, TennisDaze. Thank you, and will call Drew tomorrow. Really appreciate your help and insight on this!