I live off of Sandtown on Young lane, I have received a call from someone claiming to be with Magnolia Oil & Gas. I have a small track of land (15ac.) next to were I live and they are wanting me to sign an Oil & Gas lease with them on the 15ac. since I have 100% of the mineral rights on it. I don’t know anything about oil & gas leases or were to even began. They have made an offer per acrage on a 3year contract. Does anybody know the going rate for a lease and does anybody know how it works or can direct me to someone that can answer question.
I’m surprised you haven’t been approached about leasing previously. If you haven’t heard, Magnolia took over everything previously owned by Enervest who had a lot of producing wells and acreage held by production in your part of Washington County. Enervest is still operating everything but Magnolia is now the owner. Magnolia hasn’t done a lot of drilling since they took over from EV but all of the wells they have completed have been good ones.
Hopefully someone else on here will be able to give you an update on lease rates in your particular area. Over the last few years leases in some areas at the west side of WC have included bonuses that increased from the $250-350/acre range they had been in for a long time to over $1,000 per acre. During that time several companies, including Wildhorse Resources, GeoSouthern and Verdun were actively competing for new leases and considerable drilling was going on. Things have definitely slowed down in the recent months, not only in Washington County but for the oil business in general. Wildhorse, who was taken over by Chesapeake early this year, is no longer appears to be leasing, and GeoSouthern and Magnolia are moving much slower so I expect lease rates have have come down considerably. Since Magnolia/Enervest probably already controls most of the acreage around you it’s doubtful other companies will be competing with them for your acreage.
That said, I still think it would be worth your time to learn as much as you can and push for the best terms possible before accepting any offer. You may decide that you want to have an attorney represent you in lease negotiations but here are a couple of things you might try first.
- At the top of this page click the heading called “Mineral Help” and then read the various sections on leasing. You’ll learn a lot in a hurry.
- If all you have gotten so far is a call I’d tell the agent who called you that they need to email you something giving the details of the offer they are proposing before you can consider it.
- Talk to your neighbors. See if others have minerals that aren’t leased and tell them you are interested in sharing information and possibly negotiating as a group if they have also received a lease offer. The more acreage you can put together the more negotiating leverage you will have. If you haven’t seen the Railroad Commission’s map of your area and aren’t aware of the wells that are producing nearby and the acreage that is in those units you should check it out.
- Some other points you’ll want to try to negotiate on in addition to the bonus amount are the royalty percentage, the lease term (shorter is better), not including extension options that only benefit the company holding the lease, and adding some special provisions, particularly spelling out whether they will have the right to make a drilling location on your tract (on 15 acres I’d insist on no surface use), and no expense deductions from your royalties.
Like I said earlier, in your area Magnolia may be the only game in town if you are interested in leasing, but the first offer they make usually isn’t the best deal they would be willing to accept. Don’t let anybody rush you in to signing something before you are able to check it out.
1 Like
Dusty first of all I want to thank you so much for the response and the info that you have given. We did receive a contract Saturday in the mail. They are offering $400 an acre for a 3yr.contract with a $200 an acre for 2yr contract extention, with a royalty of 1/5. Whether that’s good are bad I have no idea. I do want to get an lawyer involved, do you know a good one that is local that I can talk to and show this contract to?
This topic was automatically closed after 60 days. New replies are no longer allowed.