Lincoln County OK Mineral Lease

[Rick_Shideler]

Hello All, Newbie here. We’ve inherited 80 acres of mineral rites in Lincoln County OK. We’ve been contacted by Grande’ Oil & Gas to lease our mineral rights for 3 years. We’re given 3 options 1) $60 per acre bonus, 1/8 royalty, 2) $50 per acre bonus, 1/6 royalty, or 3) participate in share of well cost drilling. We are new to mineral rights and live on the East coast so we’re unable to travel on site to investigate. Wondering if this is a fair offer to the community of experts here and what recommended next steps should be. Attorney? Mineral expert? Appreciate all your help.

Note: I know this type question is common on the boards butI’ve found differing opinions in the replies and I suspect its due to the fluctuating oil/gas right costs of late. Appreciate any wisdom you all can share.

Thanks!!

[Kedash]

I’d say that is low.

Where in Lincoln County is your acreage located? (Section, Township, Range).

[Rick_Shideler]

Section 32 T16N R5E.

[PeteR]

Hi Rick. We received and signed a similar agreement last year for an adjacent section. Nice to know the project is still alive. There are many previous posts in this forum for things to consider when you get a new lease. There hasn’t been any new activity in those sections for decades, so it’s nice to see something is possible.

[M_Barnes]

Welcome to the forum. Grande has been leasing in late 2020 in 30 & 31 in the 1/8th and 1/6th royalty rates. Prices are not public until there is a pooling for comparison. No pooling in the last 999 days.

First thing, you may or may not have 80 acres. The 80 is likely to be a gross tract of which you own a part due to fractionation of ownership through the generations. But it it possible if the tract was not partitioned over the years.

New owners probably should not participate as a working interest in a well. Just my opinion. They would need to have a good oil and gas attorney, good accountant and know that the liability for drilling, production and plugging will extend for decades and the financial costs (and perhaps benefits) that go with that.

The draft lease that you receive will usually be all in the operator’s favor and not in the mineral owner’s, so most of us negotiate better terms. If you are new, it is wise to get an attorney licensed in the state where you have mineral rights to negotiate for you.

Lincoln County is not in the really hot horizontal shale drilling area of the state, so do not expect those kinds of production rates or royalties. This is liable to be more modest.

The state of Oklahoma has an oil and gas commission which has a very useful website. (It does go down for scheduled maintenance every so often, so if you can’t get on, try again in a few days). Read the Mineral Help tab above for some tips. Read as many of the threads in Lincoln on the forum to get caught up a bit. Covid slowed the whole state down last year, so you may need to go back a bit.

Here are some very helpful websites from the OCC and the OK tax authority.

Pending OCC cases at the following link: http://www.occeweb.com/caseprocessingonline/default.aspx

Actual cases if you have the case numbers: http://imaging.occeweb.com/imaging/OAP.aspx

Docket proceedings: http://www.occeweb.com/ap/docket_results.html

Well activity: http://imaging.occeweb.com/imaging/OGWellRecords.aspx

Production: Gross Production

Some of the clauses in your lease that may need changing are the shut in clause, the post production charges clause, and option to extend the time, any clause that wants first rights if you get another offer to top lease. You need a depth clause, a commencement of drilling clause, strike any free use of oil, gas or water, no warranty, etc. (Not giving legal advice, just showing why an attorney helping you would be important.)

[Rick_Shideler]

Thank you all for the feedback. I suspected I was in way over my head and you’ve convinced me to seek a local OK mineral rights attorney to ensure we gather the best terms for us. Can’t thank you enough.

[M_Barnes]

This is a map of the 16N-5E Township. section 32 is in the lower left corner second one in. The circles are very old wells dating back to the 40’s & 50’s.

There was some activity in Sec 29 just to the north in 2011 and 2013. The wells here are fairly shallow. Hall 1-H in 29 was in the Oswego as was the Devon Houseman 3H with a surface location in 20.

At the moment, there are no new regulatory orders pending so drilling may be a while yet. White Star and Cervus Oil did a lot of leasing for 32 in 2016 and 2017 but did not drill. Tessera Energy had a permit to drill in 33 listed in 2019 but looks like it might have been to work on a previous well. Covid shut most activity down in all of 2020, so some places in OK are starting to cautiously open again.

[Rick_Shideler]

Martha, I’m blown away by your quick and comprehensive research. Thanks!! While I don’t fully comprehend the details, I feel I have an idea for next steps. I suspect that would be to reach an OK attorney who specializes in mineral rights unless you feel a first step might be elsewhere. I have poked around some of the website references you provided but honestly I’m not sure I know how to respond to what I’m finding. I’m that rare breed of man who knows when to ask for direction when he’s lost.