We own 116 acres of mineral rights in weld co. Our current lease will be up at the end of may. Ive heard many different numbers over the current 5 year lease and would appreciate knowing more about what we should expect upon signing a new one. Lease value in the are, duration of leases etc. Marathon leased it originally and later sub lent it to another company who is now interested in signing the new lease. Any and all help appreciated
Thank you,
Taylor Bolejack
Taylor,
You had better see documentation of the sublease to avoid entering into the legal morass that a top lease may bring. You can then determine that the current lease is actually expired before entering into a new one. Weld County oil operations will take on a new complexion in the next 3 years so you may want to figure out what you want from your minerals and deal accordingly. Don't allow the leasing companies to convince you that leasing is a retail business. It doesn't have to be that way. Get proper value for your commitments of what you own. You have much to gain in the long run if your are in the development fairway and careful to get what you want.
First, you may see the current leaseholder come back to you BEFORE the end of May and either exercise his option to renew at the old rate (guessing that such an option is in the lease) or try to enter into a new lease under different terms.
Second, recent activities in your area might just surprise you and you will find out that your lease is being held-by-drilling with unknown income to you in some months or a year.
Third, your lease may expire and you can deal with new lessees, if any. Don't hold your breath, because the drop in oil prices have reduced the interest in the whole basin except for some "sweet spots" and areas with existing well pads and pipeline hook-up. The latter will be drilled first, and only little new acreage will be leased.
If leased, expect bonuses to be lower (I hear $250 to $500 some places) and royalties maybe around 15%.
If you give us Section, Township and Range I can easily tell you more about your area. Hold tight!
John Gustavson
Certified Minerals Appraiser
John B Gustavson said:
First, you may see the current leaseholder come back to you BEFORE the end of May and either exercise his option to renew at the old rate (guessing that such an option is in the lease) or try to enter into a new lease under different terms.
Second, recent activities in your area might just surprise you and you will find out that your lease is being held-by-drilling with unknown income to you in some months or a year.
Third, your lease may expire and you can deal with new lessees, if any. Don't hold your breath, because the drop in oil prices have reduced the interest in the whole basin except for some "sweet spots" and areas with existing well pads and pipeline hook-up. The latter will be drilled first, and only little new acreage will be leased.
If leased, expect bonuses to be lower (I hear $250 to $500 some places) and royalties maybe around 15%.
If you give us Section, Township and Range I can easily tell you more about your area. Hold tight!
John Gustavson
Certified Minerals Appraiser
Taylor Bolejack:
John, the current company has said they would like to re-lease if we can come to terms. Theyve stated they would like to keep our royalties at the current 18.75% and we will negotiate on bonus money up front and duration of the lease when the time comes closer. We originally leased in 2010 at a rate of $355 per acre.
We own acres in; Section 13 Township 7N Range 62W & section 18 Township 7N Range 61W.
Gary L. Hutchinson said:
Taylor,
You had better see documentation of the sublease to avoid entering into the legal morass that a top lease may bring. You can then determine that the current lease is actually expired before entering into a new one. Weld County oil operations will take on a new complexion in the next 3 years so you may want to figure out what you want from your minerals and deal accordingly. Don't allow the leasing companies to convince you that leasing is a retail business. It doesn't have to be that way. Get proper value for your commitments of what you own. You have much to gain in the long run if your are in the development fairway and careful to get what you want.
Gary L Hutchinson
Minerals Management
Thank you Gary for the knowledgeable advice. I will continue to take heed in all further negotions as I am trying to learn the true value of said assets.
Taylor: The current Colorado OGCC map (attached) shows that Bonanza Creek (an active operator) is already drilling a well in a southerly direction. That is a well with a 2-mile horizontal length! So there is activity in the local area. The same pad looks like it was permitted by Marathon a couple of years ago, but never drilled. The Marathon well would likely have crossed your property.
The question now is whether or not the active party (Bonanza Creek) has taken steps to form units, which would also include your acreage. Then, Bonanza Creek might drill a new well going north, following the old permitted path of Marathon or longer. You can do your own research on the Bonanza well on http://cogcc.state.co.us/cogis/FacilityDetail.asp?facid=12335246&am... and click along the top row under "Doc". That will lead you to a large number of documents to screen about the plans.
You can do the same for the old Marathon permit on http://cogcc.state.co.us/cogis/FacilityDetail.asp?facid=12335270&am...
Bottom line is that renewing your old lease might be easiest (assuming that all other terms are OK, but check with an attorney). Same bonus sounds OK in today's market. However, in return for the "low" bonus try for just a two-year renewal to get them off dead center. And do not give them any renewal option.
Good Luck! And let us know, if you make a deal, because that helps us understand the changing market.
John Gustavson
1191-Localactivitymap.docx (436 KB)Upon more research I am finding that we may own more acreage than was spoken in our current lease...with no knowledge of the sites or ability to adequately dig through records what are my options outside of an oil and gas attorney? Also I am seeing in other threads that folks are being offered between $10, 000 & $14, 000 per net mineral acre to purchase the rights to said minerals?!?! I know that primarily dictated by exact location however im lost in terms of deciding what approach to take upon negotiations, again any advice is greatly appreciated!
Acreage is owned in; Section 13, Township 7N, Range 62W & Secction 18, Township 7N, Range 61W
Taylor Bolejack said:
Upon more research I am finding that we may own more acreage than was spoken in our current lease...with no knowledge of the sites or ability to adequately dig through records what are my options outside of an oil and gas attorney? Also I am seeing in other threads that folks are being offered between $10, 000 & $14, 000 per net mineral acre to purchase the rights to said minerals?!?! I know that primarily dictated by exact location however im lost in terms of deciding what approach to take upon negotiations, again any advice is greatly appreciated!
Hi Taylor: It appears that you need some land work. I have had good experience with Cynthia Zeren in Greeley, CO. Her firm, Zeren Land Services may get you an updated picture of what you own and what is going on in your immediate area. Then you can go from there to attorneys, appraisers or whatever. You are welcome to mention my name to her, if you contact her firm on (970) 351-0733.
Good Luck!
John
Our current offer is a 5 year lease on 116 acres at $500 per acre, does this sound fair for the area? Lease is a paid up lease.
Taylor,
What royalty percentage? Also, it depends on what the lease language says. Does the lease have a Depth Pugh Clause?
We’re being offered 18.75% royalty. Ive read of a Pugh clause but unsure if the new lease has one in it. Not signing lease until all negotiation questions are answered. One paragraph says we arent entitled any knowledge or data of what product has been sold or for how much. I read not to sign first lease draft and I wont.
I am an all around green horn when it comes to this kind of business I have read hundreds of articles and forums but dont want to make a decision based on self learned techniques/vocabulary that I may not properly understand. From what ive read i now realize we were taken advantage of in our last lease agreement with lack of knowledge and dont want it to happen again.
Well it sounds like you have a pretty good idea of the basic necessities of an oil and gas lease. I would not recommend signing any lease unless it has a Pugh Clause in it though. Email me at [email protected], we can talk more.