Devon, that I can’t help U with. Clint
Ok, thanks for everything. I really appreciate it
Devon, at the beginning of this thread the offers that were being made in late 2022 are given.
J walker can you explain to me how a Gross P roceeds Clause works
I am not an attorney, and nothing I say is to be taken as legal advice, just sharing my experiences. Below is a link to an article you can read to learn more. An internet search should find other articles on this topic to get a more complete understanding. That said, I think I might would try for 2.5% more royalty to avoid the enforcement required for a “no deductions of post-production costs” lease.
[Texas Supreme Court Rules That Gross Royalty Clause Prohibits Driller From Deducting Post-Production Costs | Houston Harbaugh, P.C. (hh-law.com)
(Texas Supreme Court Rules That Gross Royalty Clause Prohibits Driller From Deducting Post-Production Costs | Houston Harbaugh, P.C.)s-royalty-clause-prohibits-driller-from-deducting-post-production-costs/)
Cost Free Royalty: Lessor’s royalty shall never bear, directly or indirectly, any costs whatsoever, except taxes attributable thereto, including but not limited to, costs and expenses of production, gathering, dehydration, compression, transportation (except transportation by truck), manufacturing, processing, treating or marketing of the oil, gas, or gas products from the leased premises, nor any part of the costs of construction, operation or depreciation or any plant or other facilities or equipment for processing oil or gas products from the leased premises. The foregoing notwithstanding, in the event a third party charges Lessee for costs associated with the sale of oil, gas or gas products from the leased premises, then such costs shall be shared proportionately by the parties. Lessor’s royalty shall be calculated at the wellhead and Lessor shall, in any event, receive the same price realized by Lessee for production from the leased premises.
What do you guys think about this?
This clause has been around the block. My experience is that this clause does not prevent post-production deductions, as royalty is calculated “at the well-head”, and those costs incur later (gathering, dehydration, etc.), not on the “leased premises”. I’ve tried to enforce it before.
So in your opinion what should I add to the clause to make sure i get royalties own without any deductions periodically.
Before going to the trouble and expense of drafting a gross proceeds clause, I would negotiate terms based on a “mutually acceptable lease”. Ask for both an increase in royalty and “cost -free” clause (based on gross proceeds). If only one is available, take the higher royalty as an offset for deductions. That is because I find lease clauses more difficult to enforce. They could say no to both.
I got them to go up ton$525 bonus from $250, I also got them to add the cost free royalty which are posted above. They are telling me that anything that above a 20% royalty is a deal breaker for them.
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Tell them that if they want an extension then pay you for it up front! I leased a small interest to EOG about 2012 for $850/net mineral acre with a two year extension. This is something I have hardly ever done, but the net acreage was only 12.5 Acres. The two year option was for an additional $850/net acre. When the 3 year term was about to expire they wanted a 5 year lease for $400/net acre and onlh a 1/5. I refused to do that. Any way they pulled out of that area, but I’m still glad I did not sign their new offer.
I believe that you may have difficulty getting a cost free royalty with your royalty language - “Lessor’s royalty shall be calculated at the wellhead”. The remaining royalty language could be considered unnecessary or irrelevant. The royalty should be calculated at the first point of sale to a non-affiliated third party.
My opinion and I’m no attorney.
Hey Mike so you’re saying do something kind of like whatJ walker is saying get my Royalty based on gross precedes. By the way this is the royalty clause they sent me
If you have sufficient mineral acreage and it’s cost effective, I would suggest that you hire an O&G attorney to draft and review your mineral lease. In my opinion, it’s worth the cost.
In my experience, it’s best to negotiate the commercial terms first (royalty, bonus, and 3 year term), and then let the O&G attorney review and amend lease language to your benefit. Again, my opinion.
Mike its .74, so i don’t think it worthwhile
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