I’m a complete “newbie” to oil and gas mineral leases and royalties. I have been contacted by a land company wishing to lease the minerals on a small amount of land in Dawson County. (I do not own the surface rights, only minerals.) I’m hoping that someone in this forum might be able to guide me.
I have been offered a bonus rate of $550 per acre with a 25% royalty (minus processing cost needed to make the oil or gas marketable). Is this a good bonus rate and royalty percentage? The lease is for 3 years with an additional 2 year option.
The landman has been very responsive to all my questions, for which I am very grateful. However, when asked the name of the production company that may be drilling, I was told that the company name could not be released. Is this the normal process?
Because I own such a small amount of acreage, I hesitate to hire an oil and gas attorney to review the contract. The form used is a Producers 88 contract which has been modified to allow for horizontal drilling. Should I pay an attorney to review the contract or is this the standard contract companies use?
Any and all information and suggestions will be appreciated.
Kim, the bonus offer is often influenced by the location of your property in the county. If you email me your contact information I would be happy to talk to you in more detail about your current offer and lease form, as well as see if there are perhaps some better offers for your area.
Kim,
Compared to what I negotiated in Lea County, NM, that is a reasonable offer. Talk to David and see what the landman is paying for land close to you. The landman will try to keep everything confidential so that you have no comparisons. Without knowledge of what they are paying others, the best strategy is to drag it out as long as you can, hoping they do not walk away. The longer you talk to the landman, the more info you will get.
Kim I have 3 sections of land leased in Dawson County, where Is your land at, town ship, section, block,.
there is no reason he should not give you the production co, he is trying to flip your lease, if you send us your location I can help you more. this is a great site you will learn a lot.
The replies by David, Luke, and Willard are spot on. There are many versions of the "Producer's 88" My experience is that the initial lease offered is a version which heavily favors the lessee. That is to be expected. There are some clauses which are easily modified and the landman "expects" you to counter with, such as the "Royalty Clause" which you say allows for post production expenses. I would ask for a "cost free" royalty. Unfortunately there are many other clauses which should be looked at closely e.g. the "Shut In" provisions. I would take up the offer to have someone look at your lease.
Even though I am an attorney, I have my leases reviewed by an oil and gas specialist.
we have a section in section 43, ten sections from you, but that section is not leased our land is close to yours, we have land block 35 section 2 and section 28 leased, plus block 34 section 27 with 2 producing wells on it still waiting for block 35 to have anything not a lot of action on town ship 5 some on 3 and 4 keep your fingers crossed, 550 is not bad for that area 25% over ride is ok too, FIND out who the operator is. don't back down on that I had a lease done about 3 months ago on 35, 2 the land man would not give me the operators info I told them no a week later I had a offer from the operator himself. stick to your guns
Directly to the north of your Section 33 in Section 28 is a well(API 115-33094)that was originally drilled in 2003 as a vertical well. In 2005 it was reentered and recompleted as a Horizontal oil well in the Sprayberry Formation. You are in a very good area for future Exploration and Production. Also some older oil wells to the north west.
