I’ve been contacted with a lease offer for my mineral rights, but I really have no idea idea if what I’m being offered is fair. I have a 50% interest in 58 acres in Jefferson township, Fayette county, PA and I’m being offered $1000 an acre lease bonus with a 15% royalty on a 10 year lease with a 5 year renewal option. They r pushing to have me sign the lease very quickly and I’m worried that I don’t know enough and could lose a lot on the deal. Also it sounds like they would be taking money from the royalties to pay for the drilling, well and so on, please any help would be greatly appreciated.
Hopefully forum folks from PA will speak up. Personally, I would never take a lease more than three years and would never take an extension. Too much can happen in just three years, much less 15! Anyone who pushes me for a quick sign gets nothing. You probably need professional legal help. Ask them for a copy of the draft lease. I never sign a lease from a company that they offer. It will be all in their favor. I get legal help to change it more to my favor. The ten year + five years tells me it is a speculator and not an operator, so I would not be inclined to even consider it.
They cannot use the royalties to pay for the well. You have to drill and perforate a well and get it online and in production before royalties are even paid. Do not ever sign something you do not understand completely.
Thank you for the response, I am certainly hoping that people with knowledge about the area will chime in but, the lease I have is being sent to me from by a contract land agent for Chevron North America. He said that by signing up for the 10 year lease it benefits me because I get a larger lumpsum for the lease bonus and if they put in a producing well then I will get the royalties and keep the lease bonus. I’m really hoping that I will hear from more people soon but could you possibly tell me more about the pros and cons of the long lease, and who I could contact for more information and help with this
Also I don’t really have the funds to pay for an attorney or anything, so I’m in a bit of a predicament.
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All I can comment on is that I have read a Chevron lease from near there and it was all in Chevron’s favor and had very little in the mineral owner’s favor. Tying up your land for that long means that they probably don’t have plans in the near term. A lot can happen in three years, much less ten years. Lease prices can go up or down depending upon oil and gas prices, world politics, pipeline access, etc. Many of the clauses need negotiation.
I would suggest that you contact the NARO Appalachia section and see if they can point you to some knowledgeable folks. I just flew back from the National Convention last night (held in Pittsburg) and ran into some smart people from there. There is a NARO link on the forum and you can also try the National Office to get some contact names. They may still be in conference recovery mode. The main email is www.naro-us.org.
If anyone on the forum is near here, please give some input.
This isn’t a hot bed of activity at the moment, kind of on the edge of previous development, so I would say the lease bonus is actually aggressive given today’s natural gas prices. However, like the others I would ask for shorter lease term and higher royalty. There’s obviously a trade-off in lease bonus if you go this route. In 15 years it’s really hard to say what’s going to happen and I think having the most options is probably the right way to go. I’d ask what their offer would be for a 3 or 5 year lease and try to make your decision from there.
There have been times in the Marcellus play cycle where lease prices would easily be double or more than this price for a shorter term lease with higher royalty, so it would nice to try to be able to take advantage of that if that happens to line up with when your lease expires. A 15 year lease really limits that ability. As it stands right now none of these operators is going to be able to offer much, that’s just how the industry is at the moment. These guys are trying to lock up leases for a long time so they have the options to hold or sell/start drilling if the natural gas prices look favorable.