I was just offered a Lease Option for Section 2-8N-10W with 3 Options. I am just wondering if these are good offers and which one would be the one to take. My thoughts are it would be Option 2 but not sure. Here are the Options:
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$500 per net acre, 3 year lease, 3/16 royalty + 2 yr option @ 125% of original bonus or $625.00.
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$600 per net acre, 3 year lease, 1/6 royalty + 2 yr option @ 125% of original bonus or $625.00
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$650 per net acre, 4 year lease, 3/16 royalty.
Any help on this matter would be GREATLY appreciated.
My opinion is free (you get what you pay for), but here is my rule of thumb. Never take the first offer-it is usually lowball to see if you will bite. NEVER EVER take an option, five years is way too long in this ever-changing environment. They tie you up for too long. I rarely ever take 1/6th.
One of the closest recent force pools near you is 7-9N-8w. My notes have $800 and 3/16. That was by Chesapeake in 2011. 8N-10W hasn't been too active recently, but maybe something is coming your way.
Read up on the forum and get familiar. Be especially careful about the lease terms. If I don't know much about an area and the geologic risk is high, I usually take 3 years and 3/6. If it it part of the Woodford play, then I go for a much lower bonus and higher royalty. Your area is probably not in the best part of the Woodford. Looks like it is thinner and dry gas, so not so valuable now, maybe later on.
Thank you for your information. This stuff is a little complicated. I do have one more question. Does everyone involved with this property have to agree for them to do anything. I have sisters that wants to go ahead because they need the money.
It depends on how you own it. If each of you own your own part, you can make your own decision. If you own jointly, then you will have to decide together. If you own jointly, then you can tell the landman that you will only take a three year lease-no option , want 3/16 and you want the $650 and a depth clause of 100' and see what he says. I also rarely talk to them on the phone. I do everything in writing so I have a clear paper trail. Some people will make promises over the phone that they will not honor or will deliberately distort.
If this is your only property and you own quite a few acres, it may be worth it to consult and oil and gas attorney. It may be worth the money. If it is only a small amount of acres, then it might not be.
http://www.mineralweb.com/owners-guide/lease-proposals/oil-and-gas-leasing-top-10-things-to-do/
Read this all the way to the bottom. There is a Top 10 things not to do link and some other links to help you get more informed. Ask lots of questions. The folks on the forum are pretty good about sharing advice. We all help each other.
Debbie Alcorn said:
Thank you for your information. This stuff is a little complicated. I do have one more question. Does everyone involved with this property have to agree for them to do anything. I have sisters that wants to go ahead because they need the money.
I guess they just started leasing in 8n-10w , could not find much info yet. In 9n-10w Western O&G, Calvin Energy are doing a lot of leasing, with Cimarex Energy doing some . Calvin is leasing in 9n-9w & T.S. Duley Land leasing in 8n-9w. In 20-9n-10w they offered $700 for 1/8th 600 for 3/16th or no cash and 1/4th. M Barnes is giving you good advice .