Our property in Burleson Co was leased in February of 2013 for $500 an acre for 3 years with an option to extend for $550 an acre for 2 more with 22.5% royalty.
We were recently contacted by the company stating that our lease will come up in Feb 2016 to extend. They wanted us to know that the option would probably in the area of $300 and acre instead of $550.
We need so guidance on if this is a fair deal, should come back with a counter, and what should the counter be.
Any advice would be helpful
Did your original lease include the terms for the option? Sounds like it didn't since they are now lowering the option bonus.
Regardless of that situation, it is difficult to comment on whether or not to counter without knowing where your acreage is located. The prospectivity in Burleson County (as in most other areas) varies significantly from area to area. This, in turn, impacts lease terms
I will say that the bonus amount seems very low - just as the 22.5% royalty is on the low side (normally see 25%).
the original lease was for 3 years with an option for 2 more years at $550 an acre. The terms for the option were included in the lease.
Property: 68.932 acres. G.B.Wrath, A-21
If the option terms are part of the original lease, they cannot change them - if they don't want to pay you what the previously agreed upon option bonus is, they cannot extend your lease.
You may want to confirm this with an attorney but that is how I see it.
Wrath A-21 area is not in a great area for prospectivity in Burleson County in my opinion - every mile you get north of Highway 21 takes you farther from the Eagle Ford (primary target today) sweet spot in this area. There has really not been any successful Eagle Ford wells drilled anywhere in this area north of that "boundary".