An April 2012 offer from an oil company to lease mineral rights on 320 acres in Harding County, SD was: 5-year lease, $15/acre and royalties of 1/8 (12.5%). The contract was entitled "Producer 88."
Have other mineral rights owners been offered anything different? If I'm reading the contract correctly, the lease term of 5 years could easily become many decades long at the option of the oil company. Does anyone have ideas on how to get a better deal?
I think anything couuld be a "better deal" I have seen the producer 88 somewhere on this forum, not sure but I do not believe it had any "rave" reviews. Maby re-contact them and re-negotiate a better deal....
Brian...
Taxes and operator deductions on/from royalty could be as much as 50%. I would consider long and hard before signing a lease for so little as 1/8. Before someone enters into a contract, binds themselves and their heirs to a contract, you have to consider if it pays enough to be worthwhile. If the lessee does not do what they agreed to do, you will have to enforce the contract in court and that may cost $100,000, or you can just let it go. Likely the lease you were presented with offers the lessee many protections and absolutely none for you, not even the royalty, which they could make you sue them for. It is not against the law to owe someone money. If they do not fund the draft payment for the bonus or pay royalty, you are going to court out of your own pocket before you see any money. You can consider the lease a sale of your mineral rights, with only a mere possibility of reversion if there is no production or if production eventually ceases. In my opinion, you need your own lease with protections for you foremost and that the clauses that protect you are conditions of the lease so that if you did not get what you bargained for, there is no lease. Anything else and you are just at their mercy and I think they have little, I wouldn't count on any at any rate. Make sure ahead of time that it is worth your while. Bank drafts, bills of exchange and order for payment are unenforceable, and they may not pay you, at the very least escrow your lease and make sure you have cash payment before the lessee gets his hands on your executed lease. Study up, get professional O&G help, and good luck.