I received an offer from Edwards Land & Title (Dallas, TX), with an opening offer of $200/acre signing bonus, 3/16 royalty, and 5 year term. I have 320 Gross Acres/17.78 Net (I am assuming the $200/acre signing bonus is for net acres, not gross).
Long story short, in 2013, I was offered quite a bit more per acre, and the term was 3 years. That offer came from Kodiak Oil & Gas via Diamond Resources, a large company that does a lot in McKenzie County. That is all I have to base my knowledge off of.
From what I found, I shouldn’t lease more than 3 years… but I don’t know what the competitive going rate of leasing is? In five years, so much can change so I don’t want to go by that offer, or should I?
I have tried to Google the company and person (Cody Myers), but found very little information. The letterhead & envelope were fairly generic (I teach high school Graphic Design, so I pay attention to those things), but it may not mean anything.
Any thoughts, advice, or recommendations would be greatly appreciated.
I only lease for three years and for as high a royalty as they will offer. Diamond was the leasing agent for Kodiak back in 2013. Is the Edwards offer new? Yes, they only pay for your net acres.
The terms of the lease are the most important. You will probably not want the first offer amount as it is usually low. Tell them you only lease for three years or less. You will need to negotiate on some of the lease clauses and add an Exhibit A to handle the ones they forget to put in to protect you. Ask Edwards who they are leasing for, when are they going to drill, what formation are they going for? If he doesn’t have answers, then he is either speculating or the “man behind the curtain” does not want his plans known. If you post the section, township and range, I can tell you if things are heating up in that area.
Thank you so much for replying and helping. I’m a newbie at this, so it is a bit overwhelming. Dad left me with little information, and I only have a few old contract negotiations between, Yes, this offer is new. I was advised to contact an attorney in 2013 from McKenzie Co. by a friend who is an attorney. We live in OR and neither of us, or friends, have any knowledge of mineral rights.
Here is the information I have:
Township 147 North, Range 102 West of the 5th P.M. Section 32: S1/2
Not a ton of activity over there so I would definitely agree that you should not sign more than a three-year lease. Additionally, it looks like Peregrine drilled a horizontal well in the township just to the south which has produced 40k of oil in the first two months, which is pretty darn good for this area. Not sure how competitive leasing would be, but imagine you could likely do a couple $ better than the current offer. I am happy to pass this off to some of our colleagues that lease if you are interested?
Thank you again for your guidance… I wish there was a book for dummies on mineral rights for us folks that are newbies and want to do what is best… there is so much information on the internet that it is overwhelming.
The Edwards offer is new, 1st one since my last lease expired in 2016.
I tried Google but got some vague definitions/explanations of what Exhibit A means specific to this, could you tell me what it means? He just emailed me the offer in a 2 sentence paragraph. If I remember correctly, Kodiak offer was more official.
Anyway, your help and insight has been much appreciated. I am going to email him the questions you suggested.
If you are new, then there are books out there to help.
First of all, read the Mineral Help tab at the top of this forum.
There is a nice little book that is a bit old, by Bill Stafford called Look Before you Lease. It is on Amazon or you may be able to order it from the National Association of Mineral Owners.
Type in “Information for Inexperienced Owners” in the search (magnifying glass in the upper right) and it gives some handy information about what to look for.
The Exhibit A will override onerous clauses in the lease. Most lessees do not like you adding words to their lease (and novices should not do that), but there are parts that you can strike in a lease. You need various Ex A clauses that limit shut in time, have depth limitations, limit liability, define commencement of drilling, limit post production charges if possible, etc. I am not giving legal advice, but merely outlining possibilities. The Ex A is unique to the lease, so until you see an actual lease, hard to say what has to be fixed.
If I were you, I would email him back and ask for a formal proposal with a copy of the lease for your review. Do not agree to any terms until you see the lease. North Dakota has a statutory minimum royalty, so you would prefer to have higher than that. I usually try for 1/5th or higher.