I recently received a lease offer from Todco Properties for a 3 year 3/16 lease in Section 17 3S 1E for 600/acre. Has anyone else received an offer in the same area? Does this seem like a fair offer?
I always ask what they are offering for 1/5th or 1/4 as I would rather have a higher royalty. Looks like Casillas is planing horizontal wells in the area.
thank you for your help. What would a reasonable trade off be for a higher royalty vs a higher bonus rate?
General statement:
The bonus rate difference for 3/16ths versus 1/5th is only going to be in the hundreds of dollars or so with a one time payment.
If a well is successful, then royalties at the 1/5th could be hundreds to thousands of dollars higher than 3/16ths over the lifetime of the well or wells. FAR outweighs the bonus difference.
Wes, thats a fair offer and seems to be the going rate in the area. Regarding the other posts, the difference btw a 3/16ths ogl vs 1/5th upfront is 0.1875% vs 0.20% or about a 6% difference. Guessing the company will only offer you around $450 an acre for the 1/5th though. So if the wells were to generate 30 million, using 10 acres to make it easy at 3/16ths, thats 0.1875x10/640= 0.002929 interest, so around $88k over the lifetime + $6k signing bonus= 94k. At 1/5th, thats 0.20 x10/640= 0.002929 interest, so around $94k over the lifetime + $4500 signing bonus= $98.5k
thank you for your advice and help. The landman I am working with has agreed to a 1/5th interest and the 600/acre bonus. What specific things should I look for in the lease agreement?
Ask them for a depth clause, pugh clause and no deductions clause
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Would be wise to get an attorney to review an lease as the clauses can hold your family for decades. The draft leases are hardly ever mineral owner friendly and need quite a bit of negotiation on about 20 different clauses.
thank you for all of the advice.
My attorney is suggesting to add a " commencement clause" in addition to the Depth, Pugh, and Gross procedes clauses