So we've received a lease package for our inherited oil and gas interest in the Ellsworth District of Tyler County -- our interest is 0.059 net acres of a 53.75 acre tract. They are offering a bonus consideration and rentals paid up sum of $239.96 , a 15% royalty of the market value of gas or any other product at the mouth of the well. 5 year primary term with right of renewal and right of extension for an additional 5 years.
Kyle or anyone out there ---- is this legit ? There is no mention of this venture on the Statoil web site. Are we able to negotiate this amount? Are there other oil companies / landmen competing for this ? Should we get an attorney to negotiate for us ? We are located in Virginia and are not familiar with this inherited parcel. We have about 3 days to turn the lease package around and would greatly appreciate anyone's input !
That's about $4000 per net acre, that's not a bad deal, especially considering how little you own. The more net acreage you own the more negotiating room you have.
15% royalty isn't bad maybe try to negotiate higher. Folks are saying that 18% is great. Again, you don't have much interest so you don't have room to negotiate. Also, you don't need an attorney to negotiate. You can tell the landman yourself what you want.
I would not get an attorney for something so small. My first lease was about 20 net acres and I can't remember how much, maybe $2,000 per net. The attorney I hired to look at the lease cost me about $700. So that would be about $500 more than you are getting paid. If it gives you piece of mind, then by all means go ahead. That's primarily why I did mine.
For that little amount, I would take it, but I'm not you.
I recently signed a lease with S&A Property Research and StatOil for an inherited piece of property in the same area. My net interest was about 0.48 acres. The landman told me that bonuses are currently around $3700/acre in that area so I'm getting a little over $1600 and a 17% royalty. I wondered if it was legit myself at first but the WV DEP website does show several pending gas well permits for StatOil in that area and I just checked the Tyler County courthouse website today and my lease has been recorded there so everything seems to be in order. Your bonus consideration seems to be comparable to what I was offered... you might be able to ask for a higher royalty percentage though... I've heard of people getting as much as 18%; but since your net interest is so small I'm not sure how much bargaining power you would have. Kyle or someone else would probably know more about that.
Jim -- Thank you for the quick response. It is a small interest, and not worth the expense of hiring an attorney. We will go back and ask for 18% though and will keep everyone posted here what comes of it. Thanks so much for your reply.
Jim Neff said:
That's about $4000 per net acre, that's not a bad deal, especially considering how little you own. The more net acreage you own the more negotiating room you have.
15% royalty isn't bad maybe try to negotiate higher. Folks are saying that 18% is great. Again, you don't have much interest so you don't have room to negotiate. Also, you don't need an attorney to negotiate. You can tell the landman yourself what you want.
I would not get an attorney for something so small. My first lease was about 20 net acres and I can't remember how much, maybe $2,000 per net. The attorney I hired to look at the lease cost me about $700. So that would be about $500 more than you are getting paid. If it gives you piece of mind, then by all means go ahead. That's primarily why I did mine.
For that little amount, I would take it, but I'm not you.
Eco -- Thank you so much for this valuable information. Our piece is very small but I don't like to sign a binding contract that could last a decade or more without being knowledgeable about what we're getting into. Thanks for letting me know about the courthouse verification -- this makes us feel a lot better. We will request a larger royalty and will keep everyone posted. Thanks so much for your input !
EcoMancer said:
I recently signed a lease with S&A Property Research and StatOil for an inherited piece of property in the same area. My net interest was about 0.48 acres. The landman told me that bonuses are currently around $3700/acre in that area so I'm getting a little over $1600 and a 17% royalty. I wondered if it was legit myself at first but the WV DEP website does show several pending gas well permits for StatOil in that area and I just checked the Tyler County courthouse website today and my lease has been recorded there so everything seems to be in order. Your bonus consideration seems to be comparable to what I was offered... you might be able to ask for a higher royalty percentage though... I've heard of people getting as much as 18%; but since your net interest is so small I'm not sure how much bargaining power you would have. Kyle or someone else would probably know more about that.
Susan, and anyone else,
someone posted these links somewhere and I have learned a lot from them
Links for Oil and Gas Lease Terms and Negotiation
http://www.gdhm.com/images/pdf/jbm-ogleasechecklist.pdf
CHECKLIST FOR NEGOTIATING AN OIL AND GAS LEASE
http://recenter.tamu.edu/pdf/229.pdf
Hints on Negotiating An Oil and Gas Lease
These are written for Texas I think but the general principles are the same.
It is true that for your small acreage you might spend more on attorney fees than your bonus. However reading these documents is free, and it might give you some ideas. If you want a good attorney Kyle Nuttall is very good. He always says something about not warranting title.
It might be a good idea to ask what his fee is to review a lease at least and you do the negotiating.
Read his posts, in this and other places, and you'll learn a lot.
Susan McCabe and Eco Mancer, I have a lease with StatOil, Ellsworth Dist, Tyler Co. I am an heir of Thorton F. Twyman and C. W. Twyman, would either of you be heirs of T. F Twyman? Kyle helped my family with our lease in 2012.
Nancy,
Thank you for taking the time to copy the links. Good to know.
Bertie,
I don't think so --- this traces back to Dewetta Mahaffee, who was a McCabe great aunt.
Whoo! I'm a little late to the party. Sorry 'bout that.
If you're still negotiating this, I'd make most of the same recommendations that everyone else has -- ask for a larger bonus ($1000) and royalty (18%). I'd also recommend that you ask for Indemnification (keeps you out of any legal issues if there is litigation) and No Warranty of Title (keeps you from having to worry about whether you actually own the minerals or not, and whether there is an issue in the ownership records). Both of those will be easy to get, usually you can get them just by asking. Along the same lines, read the lease to see if it says anything about old leases and old wells; they often ask you to warrant that there are none of either. If there is something along those lines, have it removed. Again, an easy one to get. Finally, ask for gross proceeds. This one's harder to get, especially from Statoil, but try anyways.
Call if you'd like to discuss.
I got $3000 an acre and 17% gross at the wellhead from Antero in 2012. I got $4200 an acre and 15% gross at the wellhead from Statoil in 2014. Both in Ellsworth District. I was also able to get the "Pugh" clause and paid based on the BTU value of the gas (wet gas is worth more than dry gas because of the BTU value). There are several horizontal wells proposed in Ellsworth District, Pyles, Blizzard, Murner pads, all Statoil. Alliance Petroleum is drilling vertical wells in the area notably the Mendenhall 1V North, Harris and Kleeh. Statoil is spinning off shallow rights to Alliance to drill vertical wells to hold leased lands without having to pay extensions on leases. They are drilling the Devonian Shale formation. Alliance also purchased several shallow wells from Drilling Appalcian Corporation. Try to get your pooled acreage as small as possible and no right to extend the lease. That will keep your small interest from getting "diluted". Keep in mind forced pooling will probably be approved in some fashion next year.